Correlation Between FNB Corp and First Bancorp

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

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

Diversification Opportunities for FNB Corp and First Bancorp

0.88

Correlation Coefficient

FNB Corp  First Bancorp

Very poor diversification

The 3 months correlation between FNB and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FNB Corp and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and FNB Corp 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 FNB Corp are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of FNB Corp i.e., FNB Corp and First Bancorp go up and down completely randomly.

Pair Corralation between FNB Corp and First Bancorp

Considering the 90-day investment horizon FNB Corp is expected to generate 0.91 times more return on investment than First Bancorp. However, FNB Corp is 1.1 times less risky than First Bancorp. It trades about 0.25 of its potential returns per unit of risk. First Bancorp is currently generating about 0.01 per unit of risk. If you would invest  1,440  in FNB Corp on October 20, 2024 and sell it today you would earn a total of  121.00  from holding FNB Corp or generate 8.4% return on investment over 90 days.

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

FNB Corp  vs.  First Bancorp

FNB Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FNB Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

First Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, First Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FNB Corp and First Bancorp

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

The idea behind FNB Corp and First 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.