Correlation Between Regions Financial and First Community

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

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

Diversification Opportunities for Regions Financial and First Community

0.83

Correlation Coefficient

Regions Financial  First Community

Very poor diversification

The 3 months correlation between Regions and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc and Regions 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 Regions Financial are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of Regions Financial i.e., Regions Financial and First Community go up and down completely randomly.

Pair Corralation between Regions Financial and First Community

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 0.71 times more return on investment than First Community. However, Regions Financial is 1.41 times less risky than First Community. It trades about 0.22 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.14 per unit of risk. If you would invest  2,406  in Regions Financial on August 31, 2024 and sell it today you would earn a total of  319.00  from holding Regions Financial or generate 13.26% return on investment over 90 days.

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

Regions Financial  vs.  First Community Bancshares

Regions Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

First Community Banc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, First Community may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Regions Financial and First Community

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

The idea behind Regions Financial and First Community Bancshares 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 Anywhere module to track or share privately all of your investments from the convenience of any device.