Correlation Between Delhi Bank and First Bancshares

Can any of the company-specific risk be diversified away by investing in both Delhi Bank and First Bancshares at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Delhi Bank and First Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delhi Bank Corp and First Bancshares, you can compare the effects of market volatilities on Delhi Bank and First Bancshares and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Delhi Bank with a short position of First Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delhi Bank and First Bancshares.

Diversification Opportunities for Delhi Bank and First Bancshares

-0.26

Correlation Coefficient

Delhi Bank  First Bancshares

Very good diversification

The 3 months correlation between Delhi and First is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Delhi Bank Corp and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares and Delhi Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Delhi Bank Corp are associated (or correlated) with First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Delhi Bank i.e., Delhi Bank and First Bancshares go up and down completely randomly.

Pair Corralation between Delhi Bank and First Bancshares

Given the investment horizon of 90 days Delhi Bank is expected to generate 10.65 times less return on investment than First Bancshares. But when comparing it to its historical volatility, Delhi Bank Corp is 1.74 times less risky than First Bancshares. It trades about 0.01 of its potential returns per unit of risk. First Bancshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,900  in First Bancshares on September 19, 2024 and sell it today you would earn a total of  375.00  from holding First Bancshares or generate 19.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	38.07%
Values	Daily Returns

Delhi Bank Corp  vs.  First Bancshares

Delhi Bank Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Delhi Bank Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Delhi Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Delhi Bank and First Bancshares

The main advantage of trading using opposite Delhi Bank and First Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delhi Bank position performs unexpectedly, First Bancshares can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Bancshares will offset losses from the drop in First Bancshares' long position.

The idea behind Delhi Bank Corp and First Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.