Correlation Between Ponce Financial and First Financial

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

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

Diversification Opportunities for Ponce Financial and First Financial

-0.49

Correlation Coefficient

Ponce Financial  First Financial

Very good diversification

The 3 months correlation between Ponce and First is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ponce Financial Group and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest and Ponce Financial 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 Ponce Financial Group 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 Northwest has no effect on the direction of Ponce Financial i.e., Ponce Financial and First Financial go up and down completely randomly.

Pair Corralation between Ponce Financial and First Financial

Given the investment horizon of 90 days Ponce Financial Group is expected to generate 1.94 times more return on investment than First Financial. However, Ponce Financial is 1.94 times more volatile than First Financial Northwest. It trades about 0.08 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.01 per unit of risk. If you would invest  939.00  in Ponce Financial Group on October 24, 2024 and sell it today you would earn a total of  375.00  from holding Ponce Financial Group or generate 39.94% return on investment over 90 days.

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

Ponce Financial Group  vs.  First Financial Northwest

Ponce Financial Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ponce Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile essential indicators, Ponce Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

First Financial Northwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Northwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ponce Financial and First Financial

The main advantage of trading using opposite Ponce Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ponce Financial 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 Ponce Financial Group and First Financial Northwest 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 Transaction History module to view history of all your transactions and understand their impact on performance.