Correlation Between Community Bank and First Financial

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

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

Diversification Opportunities for Community Bank and First Financial

0.3

Correlation Coefficient

Community Bank  First Financial

Weak diversification

The 3 months correlation between Community and First is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Community Bank System 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 Community Bank 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 Community Bank System 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 Community Bank i.e., Community Bank and First Financial go up and down completely randomly.

Pair Corralation between Community Bank and First Financial

Considering the 90-day investment horizon Community Bank System is expected to generate 1.14 times more return on investment than First Financial. However, Community Bank is 1.14 times more volatile than First Financial Bankshares. It trades about 0.01 of its potential returns per unit of risk. First Financial Bankshares is currently generating about -0.09 per unit of risk. If you would invest  5,870  in Community Bank System on July 2, 2025 and sell it today you would earn a total of  30.00  from holding Community Bank System or generate 0.51% return on investment over 90 days.

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

Community Bank System  vs.  First Financial Bankshares

Community Bank System

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bank System are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Community Bank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Financial Bank

Risk-Adjusted Performance

Weakest

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 latest fragile performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Community Bank and First Financial

The main advantage of trading using opposite Community Bank and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Bank 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 Community Bank System 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.