Correlation Between First Financial and CCFNB Bancorp

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

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

Diversification Opportunities for First Financial and CCFNB Bancorp

0.56

Correlation Coefficient

First Financial  CCFNB Bancorp

Very weak diversification

The 3 months correlation between First and CCFNB is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and CCFNB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCFNB Bancorp and First 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 First Financial are associated (or correlated) with CCFNB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCFNB Bancorp has no effect on the direction of First Financial i.e., First Financial and CCFNB Bancorp go up and down completely randomly.

Pair Corralation between First Financial and CCFNB Bancorp

Given the investment horizon of 90 days First Financial is expected to generate 2.71 times less return on investment than CCFNB Bancorp. But when comparing it to its historical volatility, First Financial is 2.26 times less risky than CCFNB Bancorp. It trades about 0.02 of its potential returns per unit of risk. CCFNB Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,354  in CCFNB Bancorp on October 4, 2024 and sell it today you would lose (164.00) from holding CCFNB Bancorp or give up 3.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	84.65%
Values	Daily Returns

First Financial  vs.  CCFNB Bancorp

First Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CCFNB Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CCFNB Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, CCFNB Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and CCFNB Bancorp

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

The idea behind First Financial and CCFNB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.