Correlation Between Exchange Bank and First National
Can any of the company-specific risk be diversified away by investing in both Exchange Bank and First National 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 Exchange Bank and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exchange Bank and First National Bank, you can compare the effects of market volatilities on Exchange Bank and First National 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 Exchange Bank with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Bank and First National.
Diversification Opportunities for Exchange Bank and First National
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Exchange and First is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bank and First National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Bank and Exchange 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 Exchange Bank are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Bank has no effect on the direction of Exchange Bank i.e., Exchange Bank and First National go up and down completely randomly.
Pair Corralation between Exchange Bank and First National
Given the investment horizon of 90 days Exchange Bank is expected to generate 4.73 times less return on investment than First National. But when comparing it to its historical volatility, Exchange Bank is 1.94 times less risky than First National. It trades about 0.12 of its potential returns per unit of risk. First National Bank is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 21,000 in First National Bank on August 31, 2024 and sell it today you would earn a total of 3,125 from holding First National Bank or generate 14.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exchange Bank vs. First National Bank
Performance |
| Timeline |
| Exchange Bank |
| First National Bank |
Exchange Bank and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exchange Bank and First National
The main advantage of trading using opposite Exchange Bank and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Bank position performs unexpectedly, First National 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 National will offset losses from the drop in First National's long position.| Exchange Bank vs. HUMANA INC | Exchange Bank vs. SCOR PK | Exchange Bank vs. Aquagold International | Exchange Bank vs. Thrivent High Yield |
| First National vs. IF Bancorp | First National vs. LINKBANCORP | First National vs. Pathfinder Bancorp | First National vs. First Keystone Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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