Correlation Between First Bancorp and Bayfirst Financial

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

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

Diversification Opportunities for First Bancorp and Bayfirst Financial

-0.52

Correlation Coefficient

First Bancorp  Bayfirst Financial

Excellent diversification

The 3 months correlation between First and Bayfirst is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp and First Bancorp 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 First Bancorp are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of First Bancorp i.e., First Bancorp and Bayfirst Financial go up and down completely randomly.

Pair Corralation between First Bancorp and Bayfirst Financial

Given the investment horizon of 90 days First Bancorp is expected to under-perform the Bayfirst Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 1.52 times less risky than Bayfirst Financial. The stock trades about -0.12 of its potential returns per unit of risk. The Bayfirst Financial Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,325  in Bayfirst Financial Corp on November 29, 2024 and sell it today you would earn a total of  559.00  from holding Bayfirst Financial Corp or generate 42.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

First Bancorp  vs.  Bayfirst Financial Corp

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bayfirst Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Bayfirst Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and Bayfirst Financial

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

The idea behind First Bancorp and Bayfirst Financial Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.