Correlation Between Provident Financial and First Interstate

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

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

Diversification Opportunities for Provident Financial and First Interstate

0.95

Correlation Coefficient

Provident Financial  First Interstate

Almost no diversification

The 3 months correlation between Provident and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services 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 Provident Financial 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 Provident Financial Services 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 Provident Financial i.e., Provident Financial and First Interstate go up and down completely randomly.

Pair Corralation between Provident Financial and First Interstate

Considering the 90-day investment horizon Provident Financial Services is expected to generate 0.96 times more return on investment than First Interstate. However, Provident Financial Services is 1.04 times less risky than First Interstate. It trades about 0.19 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.18 per unit of risk. If you would invest  1,620  in Provident Financial Services on June 1, 2025 and sell it today you would earn a total of  370.00  from holding Provident Financial Services or generate 22.84% return on investment over 90 days.

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

Provident Financial Services  vs.  First Interstate BancSystem

Provident Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Provident Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Interstate Ban

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Provident Financial and First Interstate

The main advantage of trading using opposite Provident Financial and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial 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 Provident Financial Services 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.