Correlation Between First Foundation and CVB Financial

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

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

Diversification Opportunities for First Foundation and CVB Financial

0.48

Correlation Coefficient

First Foundation  CVB Financial

Very weak diversification

The 3 months correlation between First and CVB is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial and First Foundation 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 Foundation are associated (or correlated) with CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of First Foundation i.e., First Foundation and CVB Financial go up and down completely randomly.

Pair Corralation between First Foundation and CVB Financial

Given the investment horizon of 90 days First Foundation is expected to under-perform the CVB Financial. In addition to that, First Foundation is 1.86 times more volatile than CVB Financial. It trades about -0.01 of its total potential returns per unit of risk. CVB Financial is currently generating about 0.01 per unit of volatility. If you would invest  2,329  in CVB Financial on October 8, 2024 and sell it today you would lose (209.00) from holding CVB Financial or give up 8.97% of portfolio value over 90 days.

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

First Foundation  vs.  CVB Financial

First Foundation

Risk-Adjusted Performance

0 of 100

Very Weak

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

CVB Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Foundation and CVB Financial

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

The idea behind First Foundation and CVB 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.