Correlation Between First Bancorp and Treehouse Foods

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

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

Diversification Opportunities for First Bancorp and Treehouse Foods

-0.33

Correlation Coefficient

First Bancorp  Treehouse Foods

Very good diversification

The 3 months correlation between First and Treehouse is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods and First Bancorp 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 Bancorp are associated (or correlated) with Treehouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treehouse Foods has no effect on the direction of First Bancorp i.e., First Bancorp and Treehouse Foods go up and down completely randomly.

Pair Corralation between First Bancorp and Treehouse Foods

Given the investment horizon of 90 days First Bancorp is expected to under-perform the Treehouse Foods. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 2.25 times less risky than Treehouse Foods. The stock trades about -0.04 of its potential returns per unit of risk. The Treehouse Foods is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,755  in Treehouse Foods on September 10, 2025 and sell it today you would earn a total of  608.00  from holding Treehouse Foods or generate 34.64% return on investment over 90 days.

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

First Bancorp  vs.  Treehouse Foods

First Bancorp

Risk-Adjusted Performance

Weakest

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Bancorp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Treehouse Foods

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Treehouse Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Treehouse Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancorp and Treehouse Foods

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

The idea behind First Bancorp and Treehouse Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.