Correlation Between First Busey and CB Financial

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

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

Diversification Opportunities for First Busey and CB Financial

0.3

Correlation Coefficient

First Busey  CB Financial

Weak diversification

The 3 months correlation between First and CBFV is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding First Busey Corp and CB Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CB Financial Services and First Busey 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 Busey Corp are associated (or correlated) with CB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CB Financial Services has no effect on the direction of First Busey i.e., First Busey and CB Financial go up and down completely randomly.

Pair Corralation between First Busey and CB Financial

Given the investment horizon of 90 days First Busey is expected to generate 2.42 times less return on investment than CB Financial. In addition to that, First Busey is 1.1 times more volatile than CB Financial Services. It trades about 0.02 of its total potential returns per unit of risk. CB Financial Services is currently generating about 0.06 per unit of volatility. If you would invest  1,967  in CB Financial Services on September 3, 2024 and sell it today you would earn a total of  1,232  from holding CB Financial Services or generate 62.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

First Busey Corp  vs.  CB Financial Services

First Busey Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Busey Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Busey is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CB Financial Services

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CB Financial Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, CB Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Busey and CB Financial

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

The idea behind First Busey Corp and CB Financial Services 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.