Correlation Between Bank First and First Bancorp

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

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

Diversification Opportunities for Bank First and First Bancorp

0.81

Correlation Coefficient

Bank First  First Bancorp

Very poor diversification

The 3 months correlation between Bank and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank First National and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Bank First 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 Bank First National 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 Bank First i.e., Bank First and First Bancorp go up and down completely randomly.

Pair Corralation between Bank First and First Bancorp

Considering the 90-day investment horizon Bank First National is expected to under-perform the First Bancorp. In addition to that, Bank First is 1.2 times more volatile than First Bancorp. It trades about -0.07 of its total potential returns per unit of risk. First Bancorp is currently generating about -0.04 per unit of volatility. If you would invest  2,292  in First Bancorp on January 25, 2024 and sell it today you would lose (40.00) from holding First Bancorp or give up 1.75% of portfolio value over 90 days.

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

Bank First National  vs.  First Bancorp

Bank First National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

First Bancorp

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bank First and First Bancorp

The main advantage of trading using opposite Bank First and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank First 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 Bank First National 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.