Correlation Between First Community and RBB Bancorp

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

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

Diversification Opportunities for First Community and RBB Bancorp

0.15

Correlation Coefficient

First Community  RBB Bancorp

Average diversification

The 3 months correlation between First and RBB is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding First Community and RBB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBB Bancorp and First Community 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 Community are associated (or correlated) with RBB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBB Bancorp has no effect on the direction of First Community i.e., First Community and RBB Bancorp go up and down completely randomly.

Pair Corralation between First Community and RBB Bancorp

Given the investment horizon of 90 days First Community is expected to generate 1.18 times more return on investment than RBB Bancorp. However, First Community is 1.18 times more volatile than RBB Bancorp. It trades about -0.05 of its potential returns per unit of risk. RBB Bancorp is currently generating about -0.21 per unit of risk. If you would invest  2,421  in First Community on December 26, 2024 and sell it today you would lose (171.00) from holding First Community or give up 7.06% of portfolio value over 90 days.

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

First Community  vs.  RBB Bancorp

First Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

RBB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days RBB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Community and RBB Bancorp

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

The idea behind First Community and RBB Bancorp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.