Correlation Between First Bancorp and OFG Bancorp
Can any of the company-specific risk be diversified away by investing in both First Bancorp and OFG 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 First Bancorp and OFG Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and OFG Bancorp, you can compare the effects of market volatilities on First Bancorp and OFG 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 First Bancorp with a short position of OFG Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and OFG Bancorp.
Diversification Opportunities for First Bancorp and OFG Bancorp
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and OFG is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and OFG Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFG Bancorp and First Bancorp 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 Bancorp are associated (or correlated) with OFG Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFG Bancorp has no effect on the direction of First Bancorp i.e., First Bancorp and OFG Bancorp go up and down completely randomly.
Pair Corralation between First Bancorp and OFG Bancorp
Considering the 90-day investment horizon First Bancorp is expected to under-perform the OFG Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Bancorp is 1.18 times less risky than OFG Bancorp. The stock trades about -0.28 of its potential returns per unit of risk. The OFG Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,346 in OFG Bancorp on September 18, 2024 and sell it today you would earn a total of 67.00 from holding OFG Bancorp or generate 1.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
First Bancorp vs. OFG Bancorp
Performance |
Timeline |
First Bancorp |
OFG Bancorp |
First Bancorp and OFG Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Bancorp and OFG Bancorp
The main advantage of trading using opposite First Bancorp and OFG Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, OFG 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 OFG Bancorp will offset losses from the drop in OFG Bancorp's long position.First Bancorp vs. Franklin Financial Services | First Bancorp vs. National Bank Holdings | First Bancorp vs. Bankwell Financial Group | First Bancorp vs. Finward Bancorp |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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