Correlation Between First American and Tiptree
Can any of the company-specific risk be diversified away by investing in both First American and Tiptree 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 American and Tiptree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American and Tiptree, you can compare the effects of market volatilities on First American and Tiptree 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 American with a short position of Tiptree. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Tiptree.
Diversification Opportunities for First American and Tiptree
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Tiptree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First American and Tiptree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tiptree and First American 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 American are associated (or correlated) with Tiptree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tiptree has no effect on the direction of First American i.e., First American and Tiptree go up and down completely randomly.
Pair Corralation between First American and Tiptree
Considering the 90-day investment horizon First American is expected to generate 1.31 times less return on investment than Tiptree. But when comparing it to its historical volatility, First American is 1.35 times less risky than Tiptree. It trades about 0.03 of its potential returns per unit of risk. Tiptree is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,859 in Tiptree on November 9, 2024 and sell it today you would earn a total of 195.00 from holding Tiptree or generate 10.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American vs. Tiptree
Performance |
| Timeline |
| First American |
| Tiptree |
First American and Tiptree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Tiptree
The main advantage of trading using opposite First American and Tiptree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Tiptree 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 Tiptree will offset losses from the drop in Tiptree's long position.| First American vs. Fidelity National Financial | First American vs. Stewart Information Services | First American vs. Old Republic International | First American vs. American Financial Group |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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