Correlation Between First Reliance and First Resource

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

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

Diversification Opportunities for First Reliance and First Resource

0.44

Correlation Coefficient

First Reliance  First Resource

Very weak diversification

The 3 months correlation between First and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Reliance Bancshares and First Resource Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Resource Bank and First Reliance 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 Reliance Bancshares are associated (or correlated) with First Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Resource Bank has no effect on the direction of First Reliance i.e., First Reliance and First Resource go up and down completely randomly.

Pair Corralation between First Reliance and First Resource

Given the investment horizon of 90 days First Reliance is expected to generate 6.05 times less return on investment than First Resource. But when comparing it to its historical volatility, First Reliance Bancshares is 1.23 times less risky than First Resource. It trades about 0.04 of its potential returns per unit of risk. First Resource Bank is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,465  in First Resource Bank on April 29, 2025 and sell it today you would earn a total of  272.00  from holding First Resource Bank or generate 18.57% return on investment over 90 days.

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

First Reliance Bancshares  vs.  First Resource Bank

First Reliance Bancshares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Reliance Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Reliance is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

First Resource Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Resource Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Resource sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Reliance and First Resource

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

The idea behind First Reliance Bancshares and First Resource Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.