Correlation Between LINKBANCORP and First Bancorp

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

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

Diversification Opportunities for LINKBANCORP and First Bancorp

0.89

Correlation Coefficient

LINKBANCORP  First Bancorp

Very poor diversification

The 3 months correlation between LINKBANCORP and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding LINKBANCORP and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and LINKBANCORP 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 LINKBANCORP 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 LINKBANCORP i.e., LINKBANCORP and First Bancorp go up and down completely randomly.

Pair Corralation between LINKBANCORP and First Bancorp

Given the investment horizon of 90 days LINKBANCORP is expected to generate 1.6 times more return on investment than First Bancorp. However, LINKBANCORP is 1.6 times more volatile than First Bancorp. It trades about 0.22 of its potential returns per unit of risk. First Bancorp is currently generating about 0.24 per unit of risk. If you would invest  644.00  in LINKBANCORP on February 16, 2025 and sell it today you would earn a total of  67.00  from holding LINKBANCORP or generate 10.4% return on investment over 90 days.

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

LINKBANCORP  vs.  First Bancorp

LINKBANCORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days LINKBANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, First Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LINKBANCORP and First Bancorp

The main advantage of trading using opposite LINKBANCORP and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LINKBANCORP 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.

The idea behind LINKBANCORP and First 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.