Correlation Between TriCo Bancshares and First Community

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

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

Diversification Opportunities for TriCo Bancshares and First Community

0.9

Correlation Coefficient

TriCo Bancshares  First Community

Almost no diversification

The 3 months correlation between TriCo and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding TriCo Bancshares and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and TriCo Bancshares 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 TriCo Bancshares are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of TriCo Bancshares i.e., TriCo Bancshares and First Community go up and down completely randomly.

Pair Corralation between TriCo Bancshares and First Community

Given the investment horizon of 90 days TriCo Bancshares is expected to under-perform the First Community. But the stock apears to be less risky and, when comparing its historical volatility, TriCo Bancshares is 1.3 times less risky than First Community. The stock trades about -0.16 of its potential returns per unit of risk. The First Community is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,347  in First Community on January 6, 2025 and sell it today you would lose (289.00) from holding First Community or give up 12.31% of portfolio value over 90 days.

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

TriCo Bancshares  vs.  First Community

TriCo Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days TriCo Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

First Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with TriCo Bancshares and First Community

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

The idea behind TriCo Bancshares and First Community 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.