Correlation Between First Business and Escalade Incorporated
Can any of the company-specific risk be diversified away by investing in both First Business and Escalade Incorporated 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 Business and Escalade Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and Escalade Incorporated, you can compare the effects of market volatilities on First Business and Escalade Incorporated 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 Business with a short position of Escalade Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Escalade Incorporated.
Diversification Opportunities for First Business and Escalade Incorporated
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Escalade is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Escalade Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Escalade Incorporated and First Business 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 Business Financial are associated (or correlated) with Escalade Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Escalade Incorporated has no effect on the direction of First Business i.e., First Business and Escalade Incorporated go up and down completely randomly.
Pair Corralation between First Business and Escalade Incorporated
Given the investment horizon of 90 days First Business Financial is expected to generate 1.08 times more return on investment than Escalade Incorporated. However, First Business is 1.08 times more volatile than Escalade Incorporated. It trades about 0.22 of its potential returns per unit of risk. Escalade Incorporated is currently generating about 0.19 per unit of risk. If you would invest 4,456 in First Business Financial on August 28, 2024 and sell it today you would earn a total of 691.00 from holding First Business Financial or generate 15.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Escalade Incorporated
Performance |
| Timeline |
| First Business Financial |
| Escalade Incorporated |
First Business and Escalade Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Escalade Incorporated
The main advantage of trading using opposite First Business and Escalade Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Escalade Incorporated 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 Escalade Incorporated will offset losses from the drop in Escalade Incorporated's long position.| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. Comerica |
| Escalade Incorporated vs. Johnson Outdoors | Escalade Incorporated vs. First Business Financial | Escalade Incorporated vs. Flexsteel Industries | Escalade Incorporated vs. Superior Uniform 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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