Correlation Between First Bancorp and CF Financial

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

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

Diversification Opportunities for First Bancorp and CF Financial

0.45

Correlation Coefficient

First Bancorp  CF Financial

Very weak diversification

The 3 months correlation between First and CFFI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial 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 CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of First Bancorp i.e., First Bancorp and CF Financial go up and down completely randomly.

Pair Corralation between First Bancorp and CF Financial

Given the investment horizon of 90 days First Bancorp is expected to generate 0.69 times more return on investment than CF Financial. However, First Bancorp is 1.44 times less risky than CF Financial. It trades about 0.12 of its potential returns per unit of risk. CF Financial is currently generating about 0.03 per unit of risk. If you would invest  2,395  in First Bancorp on April 24, 2025 and sell it today you would earn a total of  275.00  from holding First Bancorp or generate 11.48% return on investment over 90 days.

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

First Bancorp  vs.  CF Financial

First Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, First Bancorp may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CF Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CF Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, CF Financial is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with First Bancorp and CF Financial

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

The idea behind First Bancorp and CF 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.