Correlation Between National Bank and First Financial

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

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

Diversification Opportunities for National Bank and First Financial

0.93

Correlation Coefficient

National Bank  First Financial

Almost no diversification

The 3 months correlation between National and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and National Bank 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 National Bank Holdings are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of National Bank i.e., National Bank and First Financial go up and down completely randomly.

Pair Corralation between National Bank and First Financial

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the First Financial. In addition to that, National Bank is 1.05 times more volatile than First Financial Bancorp. It trades about -0.24 of its total potential returns per unit of risk. First Financial Bancorp is currently generating about -0.01 per unit of volatility. If you would invest  2,941  in First Financial Bancorp on September 12, 2024 and sell it today you would lose (10.00) from holding First Financial Bancorp or give up 0.34% of portfolio value over 90 days.

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

National Bank Holdings  vs.  First Financial Bancorp

National Bank Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in National Bank Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, National Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Financial Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, First Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and First Financial

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

The idea behind National Bank Holdings and First Financial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.