Correlation Between Old Second and First Interstate

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

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

Diversification Opportunities for Old Second and First Interstate

0.88

Correlation Coefficient

Old Second  First Interstate

Very poor diversification

The 3 months correlation between Old and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Old Second Bancorp and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban and Old Second 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 Old Second Bancorp are associated (or correlated) with First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Old Second i.e., Old Second and First Interstate go up and down completely randomly.

Pair Corralation between Old Second and First Interstate

Given the investment horizon of 90 days Old Second is expected to generate 2.22 times less return on investment than First Interstate. But when comparing it to its historical volatility, Old Second Bancorp is 1.12 times less risky than First Interstate. It trades about 0.05 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,717  in First Interstate BancSystem on May 16, 2025 and sell it today you would earn a total of  319.00  from holding First Interstate BancSystem or generate 11.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Old Second Bancorp  vs.  First Interstate BancSystem

Old Second Bancorp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Old Second Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Old Second is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Interstate Ban

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental drivers, First Interstate may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Old Second and First Interstate

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

The idea behind Old Second Bancorp and First Interstate BancSystem 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.