Correlation Between First Bancorp and FNB Corp

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

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

Diversification Opportunities for First Bancorp and FNB Corp

0.91

Correlation Coefficient

First Bancorp  FNB Corp

Almost no diversification

The 3 months correlation between First and FNB is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and FNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Corp 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 FNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Corp has no effect on the direction of First Bancorp i.e., First Bancorp and FNB Corp go up and down completely randomly.

Pair Corralation between First Bancorp and FNB Corp

Considering the 90-day investment horizon First Bancorp is expected to generate 0.96 times more return on investment than FNB Corp. However, First Bancorp is 1.04 times less risky than FNB Corp. It trades about 0.04 of its potential returns per unit of risk. FNB Corp is currently generating about 0.01 per unit of risk. If you would invest  1,681  in First Bancorp on January 30, 2025 and sell it today you would earn a total of  272.00  from holding First Bancorp or generate 16.18% return on investment over 90 days.

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

First Bancorp  vs.  FNB Corp

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, First Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

FNB Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNB Corp 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 somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with First Bancorp and FNB Corp

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

The idea behind First Bancorp and FNB Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.