Correlation Between First Bancorp and Triumph Financial

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

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

Diversification Opportunities for First Bancorp and Triumph Financial

0.82

Correlation Coefficient

First Bancorp  Triumph Financial

Very poor diversification

The 3 months correlation between First and Triumph is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Triumph Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph Financial 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 Triumph Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Triumph Financial go up and down completely randomly.

Pair Corralation between First Bancorp and Triumph Financial

Given the investment horizon of 90 days First Bancorp is expected to generate 2.7 times less return on investment than Triumph Financial. In addition to that, First Bancorp is 1.14 times more volatile than Triumph Financial. It trades about 0.04 of its total potential returns per unit of risk. Triumph Financial is currently generating about 0.14 per unit of volatility. If you would invest  8,282  in Triumph Financial on September 15, 2024 and sell it today you would earn a total of  1,774  from holding Triumph Financial or generate 21.42% return on investment over 90 days.

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

First Bancorp  vs.  Triumph Financial

First Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, First Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Triumph Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Triumph Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Triumph Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and Triumph Financial

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

The idea behind First Bancorp and Triumph Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.