Correlation Between First Interstate and Shore Bancshares

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

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

Diversification Opportunities for First Interstate and Shore Bancshares

0.95

Correlation Coefficient

First Interstate  Shore Bancshares

Almost no diversification

The 3 months correlation between First and Shore is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore Bancshares and First Interstate 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 Interstate BancSystem are associated (or correlated) with Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of First Interstate i.e., First Interstate and Shore Bancshares go up and down completely randomly.

Pair Corralation between First Interstate and Shore Bancshares

Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 1.12 times more return on investment than Shore Bancshares. However, First Interstate is 1.12 times more volatile than Shore Bancshares. It trades about -0.08 of its potential returns per unit of risk. Shore Bancshares is currently generating about -0.12 per unit of risk. If you would invest  3,205  in First Interstate BancSystem on December 28, 2024 and sell it today you would lose (295.00) from holding First Interstate BancSystem or give up 9.2% of portfolio value over 90 days.

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

First Interstate BancSystem  vs.  Shore Bancshares

First Interstate Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Interstate BancSystem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Shore Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shore Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with First Interstate and Shore Bancshares

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

The idea behind First Interstate BancSystem and Shore Bancshares 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.