Correlation Between CHIBA BANK and First American
Can any of the company-specific risk be diversified away by investing in both CHIBA BANK and First American 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 CHIBA BANK and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHIBA BANK and First American Financial, you can compare the effects of market volatilities on CHIBA BANK and First American 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 CHIBA BANK with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHIBA BANK and First American.
Diversification Opportunities for CHIBA BANK and First American
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHIBA and First is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CHIBA BANK and First American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Financial and CHIBA 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 CHIBA BANK are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Financial has no effect on the direction of CHIBA BANK i.e., CHIBA BANK and First American go up and down completely randomly.
Pair Corralation between CHIBA BANK and First American
Assuming the 90 days trading horizon CHIBA BANK is expected to generate 1.15 times more return on investment than First American. However, CHIBA BANK is 1.15 times more volatile than First American Financial. It trades about 0.15 of its potential returns per unit of risk. First American Financial is currently generating about 0.03 per unit of risk. If you would invest 665.00 in CHIBA BANK on October 24, 2024 and sell it today you would earn a total of 105.00 from holding CHIBA BANK or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHIBA BANK vs. First American Financial
Performance |
| Timeline |
| CHIBA BANK |
| First American Financial |
CHIBA BANK and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHIBA BANK and First American
The main advantage of trading using opposite CHIBA BANK and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIBA BANK position performs unexpectedly, First American 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 American will offset losses from the drop in First American's long position.The idea behind CHIBA BANK and First American Financial 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.| First American vs. SALESFORCE INC CDR | First American vs. FLOW TRADERS LTD | First American vs. CHIBA BANK | First American vs. AUTO TRADER ADR |
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 CEOs Directory module to screen CEOs from public companies around the world.
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