Correlation Between First Financial and Flushing Financial

Can any of the company-specific risk be diversified away by investing in both First Financial and Flushing Financial 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 Flushing Financial 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 Flushing Financial, you can compare the effects of market volatilities on First Financial and Flushing Financial 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 Flushing Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Flushing Financial.

Diversification Opportunities for First Financial and Flushing Financial

0.74

Correlation Coefficient

First Financial  Flushing Financial

Poor diversification

The 3 months correlation between First and Flushing is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and Flushing Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flushing Financial 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 Flushing Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flushing Financial has no effect on the direction of First Financial i.e., First Financial and Flushing Financial go up and down completely randomly.

Pair Corralation between First Financial and Flushing Financial

Given the investment horizon of 90 days First Financial Bancorp is expected to under-perform the Flushing Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Bancorp is 1.28 times less risky than Flushing Financial. The stock trades about -0.07 of its potential returns per unit of risk. The Flushing Financial is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,421  in Flushing Financial on December 26, 2024 and sell it today you would lose (81.00) from holding Flushing Financial or give up 5.7% of portfolio value over 90 days.

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

First Financial Bancorp  vs.  Flushing Financial

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.

Flushing Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flushing Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Flushing Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Financial and Flushing Financial

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

The idea behind First Financial Bancorp and Flushing 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.