Correlation Between First Bancorp and Popular

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

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

Diversification Opportunities for First Bancorp and Popular

0.63

Correlation Coefficient

First Bancorp  Popular

Poor diversification

The 3 months correlation between First and Popular is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Popular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Popular 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 Popular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Popular has no effect on the direction of First Bancorp i.e., First Bancorp and Popular go up and down completely randomly.

Pair Corralation between First Bancorp and Popular

Given the investment horizon of 90 days First Bancorp is expected to under-perform the Popular. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 1.01 times less risky than Popular. The stock trades about -0.08 of its potential returns per unit of risk. The Popular is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9,351  in Popular on December 28, 2024 and sell it today you would lose (199.00) from holding Popular or give up 2.13% of portfolio value over 90 days.

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

First Bancorp  vs.  Popular

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Popular

Risk-Adjusted Performance

Very Weak

Over the last 90 days Popular has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Popular is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Bancorp and Popular

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

The idea behind First Bancorp and Popular 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.