Correlation Between First Savings and FS Bancorp

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

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

Diversification Opportunities for First Savings and FS Bancorp

0.38

Correlation Coefficient

First Savings  FS Bancorp

Weak diversification

The 3 months correlation between First and FSBW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Savings Financial and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp and First Savings 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 Savings Financial are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of First Savings i.e., First Savings and FS Bancorp go up and down completely randomly.

Pair Corralation between First Savings and FS Bancorp

Given the investment horizon of 90 days First Savings Financial is expected to under-perform the FS Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Savings Financial is 1.11 times less risky than FS Bancorp. The stock trades about -0.03 of its potential returns per unit of risk. The FS Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,887  in FS Bancorp on May 21, 2025 and sell it today you would earn a total of  99.00  from holding FS Bancorp or generate 2.55% return on investment over 90 days.

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

First Savings Financial  vs.  FS Bancorp

First Savings Financial

Risk-Adjusted Performance

Weakest

Over the last 90 days First Savings Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, First Savings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

FS Bancorp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in FS Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, FS Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Savings and FS Bancorp

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

The idea behind First Savings Financial and FS Bancorp 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.