Correlation Between First Financial and United Bancorporation

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

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

Diversification Opportunities for First Financial and United Bancorporation

0.88

Correlation Coefficient

First Financial  United Bancorporation

Very poor diversification

The 3 months correlation between First and United is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and United Bancorp. of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Bancorporation 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 United Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Bancorporation has no effect on the direction of First Financial i.e., First Financial and United Bancorporation go up and down completely randomly.

Pair Corralation between First Financial and United Bancorporation

Given the investment horizon of 90 days First Financial is expected to under-perform the United Bancorporation. In addition to that, First Financial is 2.25 times more volatile than United Bancorporation of. It trades about -0.14 of its total potential returns per unit of risk. United Bancorporation of is currently generating about -0.12 per unit of volatility. If you would invest  5,840  in United Bancorporation of on September 27, 2024 and sell it today you would lose (113.00) from holding United Bancorporation of or give up 1.93% of portfolio value over 90 days.

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

First Financial  vs.  United Bancorp. of

First Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 5 (%) 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 January 2025.

United Bancorporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Bancorporation of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, United Bancorporation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and United Bancorporation

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

The idea behind First Financial and United Bancorporation of 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 Commodity Directory module to find actively traded commodities issued by global exchanges.