Correlation Between First Mid and LINKBANCORP

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

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

Diversification Opportunities for First Mid and LINKBANCORP

0.62

Correlation Coefficient

First Mid  LINKBANCORP

Poor diversification

The 3 months correlation between First and LINKBANCORP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois and LINKBANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LINKBANCORP and First Mid 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 Mid Illinois are associated (or correlated) with LINKBANCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LINKBANCORP has no effect on the direction of First Mid i.e., First Mid and LINKBANCORP go up and down completely randomly.

Pair Corralation between First Mid and LINKBANCORP

Given the investment horizon of 90 days First Mid Illinois is expected to generate 0.78 times more return on investment than LINKBANCORP. However, First Mid Illinois is 1.28 times less risky than LINKBANCORP. It trades about -0.04 of its potential returns per unit of risk. LINKBANCORP is currently generating about -0.05 per unit of risk. If you would invest  3,670  in First Mid Illinois on December 30, 2024 and sell it today you would lose (168.00) from holding First Mid Illinois or give up 4.58% of portfolio value over 90 days.

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

First Mid Illinois  vs.  LINKBANCORP

First Mid Illinois

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Mid Illinois has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Mid is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

LINKBANCORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days LINKBANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First Mid and LINKBANCORP

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

The idea behind First Mid Illinois and LINKBANCORP 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.