Correlation Between First Mid and BCB Bancorp
Can any of the company-specific risk be diversified away by investing in both First Mid and BCB 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 Mid and BCB Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Mid Illinois and BCB Bancorp, you can compare the effects of market volatilities on First Mid and BCB 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 Mid with a short position of BCB Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Mid and BCB Bancorp.
Diversification Opportunities for First Mid and BCB Bancorp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and BCB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Mid Illinois and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp and First Mid 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 Mid Illinois are associated (or correlated) with BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of First Mid i.e., First Mid and BCB Bancorp go up and down completely randomly.
Pair Corralation between First Mid and BCB Bancorp
Given the investment horizon of 90 days First Mid Illinois is expected to under-perform the BCB Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Mid Illinois is 1.2 times less risky than BCB Bancorp. The stock trades about -0.11 of its potential returns per unit of risk. The BCB Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,198 in BCB Bancorp on July 12, 2024 and sell it today you would earn a total of 8.00 from holding BCB Bancorp or generate 0.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
First Mid Illinois vs. BCB Bancorp
Performance |
Timeline |
First Mid Illinois |
BCB Bancorp |
First Mid and BCB Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Mid and BCB Bancorp
The main advantage of trading using opposite First Mid and BCB Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Mid position performs unexpectedly, BCB 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 BCB Bancorp will offset losses from the drop in BCB Bancorp's long position.First Mid vs. Finward Bancorp | First Mid vs. Great Southern Bancorp | First Mid vs. Franklin Financial Services | First Mid vs. Community West Bancshares |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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