Correlation Between First Bancshares and Community Heritage

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

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

Diversification Opportunities for First Bancshares and Community Heritage

0.28

Correlation Coefficient

First Bancshares  Community Heritage

Modest diversification

The 3 months correlation between First and Community is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Bancshares and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage and First Bancshares 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 Bancshares are associated (or correlated) with Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of First Bancshares i.e., First Bancshares and Community Heritage go up and down completely randomly.

Pair Corralation between First Bancshares and Community Heritage

If you would invest  1,754  in Community Heritage Financial on June 22, 2024 and sell it today you would earn a total of  346.00  from holding Community Heritage Financial or generate 19.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.96%
Values	Daily Returns

First Bancshares  vs.  Community Heritage Financial

First Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Community Heritage

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Community Heritage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Bancshares and Community Heritage

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

The idea behind First Bancshares and Community Heritage 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.