Correlation Between First Bancorp and HTBI Old

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

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

Diversification Opportunities for First Bancorp and HTBI Old

-0.37

Correlation Coefficient

First Bancorp  HTBI Old

Very good diversification

The 3 months correlation between First and HTBI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and HTBI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HTBI Old 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 HTBI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HTBI Old has no effect on the direction of First Bancorp i.e., First Bancorp and HTBI Old go up and down completely randomly.

Pair Corralation between First Bancorp and HTBI Old

Given the investment horizon of 90 days First Bancorp is expected to under-perform the HTBI Old. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 1.03 times less risky than HTBI Old. The stock trades about -0.06 of its potential returns per unit of risk. The HTBI Old is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,372  in HTBI Old on December 29, 2024 and sell it today you would earn a total of  283.00  from holding HTBI Old or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.66%
Values	Daily Returns

First Bancorp  vs.  HTBI Old

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 rather sound basic indicators, First Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

HTBI Old

Risk-Adjusted Performance

OK

Over the last 90 days HTBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile fundamental drivers, HTBI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and HTBI Old

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

The idea behind First Bancorp and HTBI Old 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.