Correlation Between Community Trust and First Financial

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

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

Diversification Opportunities for Community Trust and First Financial

0.2

Correlation Coefficient

Community Trust  First Financial

Modest diversification

The 3 months correlation between Community and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and Community Trust 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 Community Trust Bancorp 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 Bank has no effect on the direction of Community Trust i.e., Community Trust and First Financial go up and down completely randomly.

Pair Corralation between Community Trust and First Financial

Given the investment horizon of 90 days Community Trust Bancorp is expected to generate 1.09 times more return on investment than First Financial. However, Community Trust is 1.09 times more volatile than First Financial Bankshares. It trades about 0.09 of its potential returns per unit of risk. First Financial Bankshares is currently generating about -0.02 per unit of risk. If you would invest  5,285  in Community Trust Bancorp on October 10, 2025 and sell it today you would earn a total of  437.00  from holding Community Trust Bancorp or generate 8.27% return on investment over 90 days.

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

Community Trust Bancorp  vs.  First Financial Bankshares

Community Trust Bancorp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Community Trust Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Community Trust may actually be approaching a critical reversion point that can send shares even higher in February 2026.

First Financial Bank

Risk-Adjusted Performance

Weakest

Over the last 90 days First Financial Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, First Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Community Trust and First Financial

The main advantage of trading using opposite Community Trust and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Trust 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 Community Trust Bancorp and First Financial Bankshares 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.