Correlation Between First Financial and Richmond Mutual

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

Diversification Opportunities for First Financial and Richmond Mutual

0.01

Correlation Coefficient

First Financial  Richmond Mutual

Significant diversification

The 3 months correlation between First and Richmond is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Richmond Mutual Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richmond Mutual Banc 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 Richmond Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richmond Mutual Banc has no effect on the direction of First Financial i.e., First Financial and Richmond Mutual go up and down completely randomly.

Pair Corralation between First Financial and Richmond Mutual

Given the investment horizon of 90 days First Financial is expected to generate 144.78 times less return on investment than Richmond Mutual. But when comparing it to its historical volatility, First Financial Northwest is 1.44 times less risky than Richmond Mutual. It trades about 0.0 of its potential returns per unit of risk. Richmond Mutual Bancorporation is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,265  in Richmond Mutual Bancorporation on September 4, 2024 and sell it today you would earn a total of  223.00  from holding Richmond Mutual Bancorporation or generate 17.63% return on investment over 90 days.

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

First Financial Northwest  vs.  Richmond Mutual Bancorp.

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Richmond Mutual Banc

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Mutual Bancorporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Richmond Mutual demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and Richmond Mutual

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

The idea behind First Financial Northwest and Richmond Mutual Bancorporation 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.