Correlation Between First Bancorp and Dah Sing

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

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

Diversification Opportunities for First Bancorp and Dah Sing

-0.48

Correlation Coefficient

First Bancorp  Dah Sing

Very good diversification

The 3 months correlation between First and Dah is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Dah Sing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dah Sing Financial 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 Dah Sing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dah Sing Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Dah Sing go up and down completely randomly.

Pair Corralation between First Bancorp and Dah Sing

Considering the 90-day investment horizon First Bancorp is expected to under-perform the Dah Sing. In addition to that, First Bancorp is 1.14 times more volatile than Dah Sing Financial. It trades about -0.43 of its total potential returns per unit of risk. Dah Sing Financial is currently generating about 0.34 per unit of volatility. If you would invest  952.00  in Dah Sing Financial on September 25, 2024 and sell it today you would earn a total of  88.00  from holding Dah Sing Financial or generate 9.24% 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.  Dah Sing Financial

First Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Dah Sing Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dah Sing Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Dah Sing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and Dah Sing

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

The idea behind First Bancorp and Dah Sing Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.