Correlation Between First Bancshares, and First Foundation

Can any of the company-specific risk be diversified away by investing in both First Bancshares, and First Foundation 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 First Bancshares, and First Foundation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The First Bancshares, and First Foundation, you can compare the effects of market volatilities on First Bancshares, and First Foundation 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 First Bancshares, with a short position of First Foundation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancshares, and First Foundation.

Diversification Opportunities for First Bancshares, and First Foundation

0.87

Correlation Coefficient

First Bancshares,  First Foundation

Very poor diversification

The 3 months correlation between First and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The First Bancshares, and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation and First Bancshares, 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 The First Bancshares, are associated (or correlated) with First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of First Bancshares, i.e., First Bancshares, and First Foundation go up and down completely randomly.

Pair Corralation between First Bancshares, and First Foundation

Given the investment horizon of 90 days The First Bancshares, is expected to generate 0.5 times more return on investment than First Foundation. However, The First Bancshares, is 1.99 times less risky than First Foundation. It trades about 0.07 of its potential returns per unit of risk. First Foundation is currently generating about 0.01 per unit of risk. If you would invest  2,765  in The First Bancshares, on September 12, 2024 and sell it today you would earn a total of  913.00  from holding The First Bancshares, or generate 33.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The First Bancshares,  vs.  First Foundation

First Bancshares,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The First Bancshares, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, First Bancshares, unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Foundation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Foundation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Foundation displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancshares, and First Foundation

The main advantage of trading using opposite First Bancshares, and First Foundation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares, position performs unexpectedly, First Foundation 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 Foundation will offset losses from the drop in First Foundation's long position.

The idea behind The First Bancshares, and First Foundation 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 Transaction History module to view history of all your transactions and understand their impact on performance.