Correlation Between Tompkins Financial and First Financial

Can any of the company-specific risk be diversified away by investing in both Tompkins 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 Tompkins 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 Tompkins Financial and First Financial Northwest, you can compare the effects of market volatilities on Tompkins 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 Tompkins Financial with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tompkins Financial and First Financial.

Diversification Opportunities for Tompkins Financial and First Financial

-0.18

Correlation Coefficient

Tompkins Financial  First Financial

Good diversification

The 3 months correlation between Tompkins and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tompkins Financial 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 Tompkins 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 Tompkins Financial 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 Tompkins Financial i.e., Tompkins Financial and First Financial go up and down completely randomly.

Pair Corralation between Tompkins Financial and First Financial

Considering the 90-day investment horizon Tompkins Financial is expected to under-perform the First Financial. In addition to that, Tompkins Financial is 2.04 times more volatile than First Financial Northwest. It trades about -0.29 of its total potential returns per unit of risk. First Financial Northwest is currently generating about -0.16 per unit of volatility. If you would invest  2,223  in First Financial Northwest on October 6, 2024 and sell it today you would lose (73.00) from holding First Financial Northwest or give up 3.28% of portfolio value over 90 days.

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

Tompkins Financial  vs.  First Financial Northwest

Tompkins Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tompkins Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, Tompkins Financial reported 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 fairly stable basic indicators, First Financial is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tompkins Financial and First Financial

The main advantage of trading using opposite Tompkins Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tompkins 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 Tompkins Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.