Correlation Between First Financial and Heartland Financial
Can any of the company-specific risk be diversified away by investing in both First Financial and Heartland Financial 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 First Financial and Heartland Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bankshares and Heartland Financial USA, you can compare the effects of market volatilities on First Financial and Heartland Financial 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 First Financial with a short position of Heartland Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Heartland Financial.
Diversification Opportunities for First Financial and Heartland Financial
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Heartland is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Heartland Financial USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Financial USA and First 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 First Financial Bankshares are associated (or correlated) with Heartland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Financial USA has no effect on the direction of First Financial i.e., First Financial and Heartland Financial go up and down completely randomly.
Pair Corralation between First Financial and Heartland Financial
Given the investment horizon of 90 days First Financial Bankshares is expected to under-perform the Heartland Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Bankshares is 1.09 times less risky than Heartland Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Heartland Financial USA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,965 in Heartland Financial USA on February 12, 2024 and sell it today you would earn a total of 430.00 from holding Heartland Financial USA or generate 10.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
First Financial Bankshares vs. Heartland Financial USA
Performance |
Timeline |
First Financial Bank |
Heartland Financial USA |
First Financial and Heartland Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Financial and Heartland Financial
The main advantage of trading using opposite First Financial and Heartland Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Heartland Financial 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 Heartland Financial will offset losses from the drop in Heartland Financial's long position.First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
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Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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