Correlation Between First Community and First Bancorp
Can any of the company-specific risk be diversified away by investing in both First Community and First Bancorp 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 Community and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community Bancshares and First Bancorp, you can compare the effects of market volatilities on First Community and First Bancorp 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 Community with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and First Bancorp.
Diversification Opportunities for First Community and First Bancorp
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and First Community 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 Community Bancshares are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of First Community i.e., First Community and First Bancorp go up and down completely randomly.
Pair Corralation between First Community and First Bancorp
Given the investment horizon of 90 days First Community is expected to generate 2.35 times less return on investment than First Bancorp. But when comparing it to its historical volatility, First Community Bancshares is 1.09 times less risky than First Bancorp. It trades about 0.02 of its potential returns per unit of risk. First Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,048 in First Bancorp on May 4, 2025 and sell it today you would earn a total of 1,788 from holding First Bancorp or generate 58.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Community Bancshares vs. First Bancorp
Performance |
Timeline |
First Community Banc |
First Bancorp |
First Community and First Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Community and First Bancorp
The main advantage of trading using opposite First Community and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, First Bancorp 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 Bancorp will offset losses from the drop in First Bancorp's long position.First Community vs. El Pollo Loco | First Community vs. Rave Restaurant Group | First Community vs. Boston Properties | First Community vs. Kilroy Realty Corp |
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Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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