Correlation Between First Bancorp and LINKBANCORP

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

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

Diversification Opportunities for First Bancorp and LINKBANCORP

0.83

Correlation Coefficient

First Bancorp  LINKBANCORP

Very poor diversification

The 3 months correlation between First and LINKBANCORP is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and LINKBANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LINKBANCORP and First Bancorp 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 Bancorp 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 Bancorp i.e., First Bancorp and LINKBANCORP go up and down completely randomly.

Pair Corralation between First Bancorp and LINKBANCORP

Given the investment horizon of 90 days First Bancorp is expected to under-perform the LINKBANCORP. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 1.49 times less risky than LINKBANCORP. The stock trades about -0.08 of its potential returns per unit of risk. The LINKBANCORP is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  743.00  in LINKBANCORP on December 30, 2024 and sell it today you would lose (53.00) from holding LINKBANCORP or give up 7.13% of portfolio value over 90 days.

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

First Bancorp  vs.  LINKBANCORP

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Bancorp and LINKBANCORP

The main advantage of trading using opposite First Bancorp and LINKBANCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp 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 Bancorp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.