Correlation Between First Financial and WesBanco

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

Diversification Opportunities for First Financial and WesBanco

-0.23

Correlation Coefficient

First Financial  WesBanco

Very good diversification

The 3 months correlation between First and WesBanco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of First Financial i.e., First Financial and WesBanco go up and down completely randomly.

Pair Corralation between First Financial and WesBanco

Given the investment horizon of 90 days First Financial Northwest is expected to generate 0.61 times more return on investment than WesBanco. However, First Financial Northwest is 1.64 times less risky than WesBanco. It trades about -0.16 of its potential returns per unit of risk. WesBanco is currently generating about -0.27 per unit of risk. If you would invest  2,223  in First Financial Northwest on October 6, 2024 and sell it today you would lose (73.00) from holding First Financial Northwest or give up 3.28% 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.  WesBanco

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.

WesBanco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, WesBanco may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Financial and WesBanco

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

The idea behind First Financial Northwest and WesBanco 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.