Correlation Between First Mid and RBB Bancorp

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

Diversification Opportunities for First Mid and RBB Bancorp

0.86

Correlation Coefficient

First Mid  RBB Bancorp

Very poor diversification

The 3 months correlation between First and RBB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois and RBB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBB Bancorp 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 RBB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBB Bancorp has no effect on the direction of First Mid i.e., First Mid and RBB Bancorp go up and down completely randomly.

Pair Corralation between First Mid and RBB Bancorp

Given the investment horizon of 90 days First Mid Illinois is expected to generate 1.41 times more return on investment than RBB Bancorp. However, First Mid is 1.41 times more volatile than RBB Bancorp. It trades about 0.13 of its potential returns per unit of risk. RBB Bancorp is currently generating about 0.1 per unit of risk. If you would invest  3,849  in First Mid Illinois on August 30, 2024 and sell it today you would earn a total of  369.00  from holding First Mid Illinois or generate 9.59% return on investment over 90 days.

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

First Mid Illinois  vs.  RBB Bancorp

First Mid Illinois

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Mid Illinois are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, First Mid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

RBB Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBB Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, RBB Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Mid and RBB Bancorp

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

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