Correlation Between First National and Exchange Bank
Can any of the company-specific risk be diversified away by investing in both First National and Exchange 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 First National and Exchange Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Bank and Exchange Bank, you can compare the effects of market volatilities on First National and Exchange 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 First National with a short position of Exchange Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Exchange Bank.
Diversification Opportunities for First National and Exchange Bank
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Exchange is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding First National Bank and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank and First National 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 National Bank are associated (or correlated) with Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of First National i.e., First National and Exchange Bank go up and down completely randomly.
Pair Corralation between First National and Exchange Bank
Given the investment horizon of 90 days First National Bank is expected to generate 1.94 times more return on investment than Exchange Bank. However, First National is 1.94 times more volatile than Exchange Bank. It trades about 0.29 of its potential returns per unit of risk. Exchange Bank is currently generating about 0.12 per unit of risk. 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 |
First National Bank vs. Exchange Bank
Performance |
| Timeline |
| First National Bank |
| Exchange Bank |
First National and Exchange Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Exchange Bank
The main advantage of trading using opposite First National and Exchange Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, Exchange 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 Exchange Bank will offset losses from the drop in Exchange Bank's long position.| First National vs. IF Bancorp | First National vs. LINKBANCORP | First National vs. Pathfinder Bancorp | First National vs. First Keystone Corp |
| Exchange Bank vs. HUMANA INC | Exchange Bank vs. SCOR PK | Exchange Bank vs. Aquagold International | Exchange Bank vs. Thrivent High Yield |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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