Correlation Between Alphabet and First Financial

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

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

Diversification Opportunities for Alphabet and First Financial

0.35

Correlation Coefficient

Alphabet  First Financial

Weak diversification

The 3 months correlation between Alphabet and First is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bank has no effect on the direction of Alphabet i.e., Alphabet and First Financial go up and down completely randomly.

Pair Corralation between Alphabet and First Financial

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the First Financial. In addition to that, Alphabet is 1.32 times more volatile than First Financial Bankshares. It trades about -0.12 of its total potential returns per unit of risk. First Financial Bankshares is currently generating about 0.01 per unit of volatility. If you would invest  3,620  in First Financial Bankshares on December 29, 2024 and sell it today you would earn a total of  9.00  from holding First Financial Bankshares or generate 0.25% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  First Financial Bankshares

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

First Financial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, First Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and First Financial

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

The idea behind Alphabet Inc Class C and First Financial Bankshares 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..