Correlation Between First Bankers and Exchange Bankshares

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

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

Diversification Opportunities for First Bankers and Exchange Bankshares

0.82

Correlation Coefficient

First Bankers  Exchange Bankshares

Very poor diversification

The 3 months correlation between First and Exchange is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Bankers Trustshares and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares and First Bankers 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 Bankers Trustshares are associated (or correlated) with Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of First Bankers i.e., First Bankers and Exchange Bankshares go up and down completely randomly.

Pair Corralation between First Bankers and Exchange Bankshares

Given the investment horizon of 90 days First Bankers Trustshares is expected to generate 12.53 times more return on investment than Exchange Bankshares. However, First Bankers is 12.53 times more volatile than Exchange Bankshares. It trades about 0.1 of its potential returns per unit of risk. Exchange Bankshares is currently generating about 0.24 per unit of risk. If you would invest  1,629  in First Bankers Trustshares on October 22, 2024 and sell it today you would earn a total of  26.00  from holding First Bankers Trustshares or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

First Bankers Trustshares  vs.  Exchange Bankshares

First Bankers Trustshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bankers Trustshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Exchange Bankshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bankshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bankers and Exchange Bankshares

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

The idea behind First Bankers Trustshares and Exchange Bankshares 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.