Correlation Between First Financial and Bayfirst Financial

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

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

Diversification Opportunities for First Financial and Bayfirst Financial

-0.31

Correlation Coefficient

First Financial  Bayfirst Financial

Very good diversification

The 3 months correlation between First and Bayfirst is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp 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 Northwest are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of First Financial i.e., First Financial and Bayfirst Financial go up and down completely randomly.

Pair Corralation between First Financial and Bayfirst Financial

Given the investment horizon of 90 days First Financial Northwest is expected to under-perform the Bayfirst Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Northwest is 2.53 times less risky than Bayfirst Financial. The stock trades about -0.04 of its potential returns per unit of risk. The Bayfirst Financial Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,338  in Bayfirst Financial Corp on September 16, 2024 and sell it today you would lose (16.00) from holding Bayfirst Financial Corp or give up 1.2% of portfolio value over 90 days.

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

First Financial Northwest  vs.  Bayfirst Financial Corp

First Financial Northwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Northwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Financial is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Bayfirst Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayfirst Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bayfirst Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Financial and Bayfirst Financial

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

The idea behind First Financial Northwest and Bayfirst Financial Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.