Correlation Between First Financial and Columbia Banking

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

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

Diversification Opportunities for First Financial and Columbia Banking

0.93

Correlation Coefficient

First Financial  Columbia Banking

Almost no diversification

The 3 months correlation between First and Columbia is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and Columbia Banking System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Banking System and First Financial 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 Financial Bancorp are associated (or correlated) with Columbia Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Banking System has no effect on the direction of First Financial i.e., First Financial and Columbia Banking go up and down completely randomly.

Pair Corralation between First Financial and Columbia Banking

Given the investment horizon of 90 days First Financial Bancorp is expected to under-perform the Columbia Banking. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Bancorp is 1.11 times less risky than Columbia Banking. The stock trades about -0.07 of its potential returns per unit of risk. The Columbia Banking System is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,658  in Columbia Banking System on December 28, 2024 and sell it today you would lose (185.00) from holding Columbia Banking System or give up 6.96% of portfolio value over 90 days.

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

First Financial Bancorp  vs.  Columbia Banking System

First Financial Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Columbia Banking System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Banking System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First Financial and Columbia Banking

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

The idea behind First Financial Bancorp and Columbia Banking System 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..