Correlation Between First Financial and Hua Nan
Can any of the company-specific risk be diversified away by investing in both First Financial and Hua Nan 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 Hua Nan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Holding and Hua Nan Financial, you can compare the effects of market volatilities on First Financial and Hua Nan 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 Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Hua Nan.
Diversification Opportunities for First Financial and Hua Nan
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Hua is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Holding and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial 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 Holding are associated (or correlated) with Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of First Financial i.e., First Financial and Hua Nan go up and down completely randomly.
Pair Corralation between First Financial and Hua Nan
Assuming the 90 days trading horizon First Financial Holding is expected to generate 1.72 times more return on investment than Hua Nan. However, First Financial is 1.72 times more volatile than Hua Nan Financial. It trades about 0.05 of its potential returns per unit of risk. Hua Nan Financial is currently generating about 0.02 per unit of risk. If you would invest 2,735 in First Financial Holding on August 28, 2024 and sell it today you would earn a total of 30.00 from holding First Financial Holding or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Holding vs. Hua Nan Financial
Performance |
| Timeline |
| First Financial Holding |
| Hua Nan Financial |
First Financial and Hua Nan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Hua Nan
The main advantage of trading using opposite First Financial and Hua Nan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Hua Nan 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 Hua Nan will offset losses from the drop in Hua Nan's long position.| First Financial vs. Mega Financial Holding | First Financial vs. CTBC Financial Holding | First Financial vs. Hua Nan Financial | First Financial vs. ESUN Financial Holding |
| Hua Nan vs. First Financial Holding | Hua Nan vs. Mega Financial Holding | Hua Nan vs. CTBC Financial Holding | Hua Nan vs. ESUN Financial Holding |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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