Correlation Between First Business and First Keystone
Can any of the company-specific risk be diversified away by investing in both First Business and First Keystone 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 First Keystone 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 First Keystone Corp, you can compare the effects of market volatilities on First Business and First Keystone 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 First Keystone. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and First Keystone.
Diversification Opportunities for First Business and First Keystone
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and First Keystone Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Keystone Corp 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 First Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Keystone Corp has no effect on the direction of First Business i.e., First Business and First Keystone go up and down completely randomly.
Pair Corralation between First Business and First Keystone
Given the investment horizon of 90 days First Business Financial is expected to generate 0.46 times more return on investment than First Keystone. However, First Business Financial is 2.19 times less risky than First Keystone. It trades about 0.04 of its potential returns per unit of risk. First Keystone Corp is currently generating about 0.02 per unit of risk. If you would invest 3,558 in First Business Financial on September 3, 2024 and sell it today you would earn a total of 1,454 from holding First Business Financial or generate 40.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.31% |
| Values | Daily Returns |
First Business Financial vs. First Keystone Corp
Performance |
| Timeline |
| First Business Financial |
| First Keystone Corp |
First Business and First Keystone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and First Keystone
The main advantage of trading using opposite First Business and First Keystone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, First Keystone 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 Keystone will offset losses from the drop in First Keystone's long position.| First Business vs. JPMorgan Chase Co | First Business vs. Citigroup | First Business vs. Wells Fargo | First Business vs. Toronto Dominion Bank |
| First Keystone vs. Western Asset Global | First Keystone vs. Invesco Trust For | First Keystone vs. Logan Ridge Finance | First Keystone vs. Invesco Advantage MIT |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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