Correlation Between CSP and First Business

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

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

Diversification Opportunities for CSP and First Business

-0.32

Correlation Coefficient

CSP  First Business

Very good diversification

The 3 months correlation between CSP and First is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and CSP 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 CSP Inc are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of CSP i.e., CSP and First Business go up and down completely randomly.

Pair Corralation between CSP and First Business

Given the investment horizon of 90 days CSP Inc is expected to under-perform the First Business. In addition to that, CSP is 2.4 times more volatile than First Business Financial. It trades about -0.17 of its total potential returns per unit of risk. First Business Financial is currently generating about -0.02 per unit of volatility. If you would invest  4,837  in First Business Financial on May 4, 2025 and sell it today you would lose (148.00) from holding First Business Financial or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CSP Inc  vs.  First Business Financial

CSP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in September 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

First Business Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Business Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, First Business is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CSP and First Business

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

The idea behind CSP Inc and First Business Financial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.