Correlation Between First Financial and MetroCity Bankshares

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

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

Diversification Opportunities for First Financial and MetroCity Bankshares

0.85

Correlation Coefficient

First Financial  MetroCity Bankshares

Very poor diversification

The 3 months correlation between First and MetroCity is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and MetroCity Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetroCity Bankshares and First 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 First Financial are associated (or correlated) with MetroCity Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetroCity Bankshares has no effect on the direction of First Financial i.e., First Financial and MetroCity Bankshares go up and down completely randomly.

Pair Corralation between First Financial and MetroCity Bankshares

Given the investment horizon of 90 days First Financial is expected to generate 1.02 times more return on investment than MetroCity Bankshares. However, First Financial is 1.02 times more volatile than MetroCity Bankshares. It trades about 0.01 of its potential returns per unit of risk. MetroCity Bankshares is currently generating about -0.09 per unit of risk. If you would invest  5,528  in First Financial on July 28, 2025 and sell it today you would earn a total of  1.00  from holding First Financial or generate 0.02% return on investment over 90 days.

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

First Financial  vs.  MetroCity Bankshares

First Financial

Risk-Adjusted Performance

Weakest

Over the last 90 days First Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, First Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MetroCity Bankshares

Risk-Adjusted Performance

Weakest

Over the last 90 days MetroCity Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with First Financial and MetroCity Bankshares

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

The idea behind First Financial and MetroCity 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.