Correlation Between Dupont De and First Bank
Can any of the company-specific risk be diversified away by investing in both Dupont De and First Bank 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 Dupont De and First Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and First Bank, you can compare the effects of market volatilities on Dupont De and First Bank 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 Dupont De with a short position of First Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and First Bank.
Diversification Opportunities for Dupont De and First Bank
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dupont and First is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and First Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bank and Dupont De 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 Dupont De Nemours are associated (or correlated) with First Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bank has no effect on the direction of Dupont De i.e., Dupont De and First Bank go up and down completely randomly.
Pair Corralation between Dupont De and First Bank
Allowing for the 90-day total investment horizon Dupont De is expected to generate 3.15 times less return on investment than First Bank. But when comparing it to its historical volatility, Dupont De Nemours is 1.32 times less risky than First Bank. It trades about 0.06 of its potential returns per unit of risk. First Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,394 in First Bank on September 2, 2024 and sell it today you would earn a total of 85.00 from holding First Bank or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dupont De Nemours vs. First Bank
Performance |
| Timeline |
| Dupont De Nemours |
| First Bank |
Dupont De and First Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dupont De and First Bank
The main advantage of trading using opposite Dupont De and First Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, First Bank 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 Bank will offset losses from the drop in First Bank's long position.| Dupont De vs. Eastman Chemical | Dupont De vs. Olin Corporation | Dupont De vs. Cabot | Dupont De vs. Kronos Worldwide |
| First Bank vs. First Northwest Bancorp | First Bank vs. FS Bancorp | First Bank vs. The First Bancshares, | First Bank vs. First Guaranty Bancshares |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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