Correlation Between Firm Capital and First National
Can any of the company-specific risk be diversified away by investing in both Firm Capital 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 Firm Capital and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firm Capital Mortgage and First National Financial, you can compare the effects of market volatilities on Firm Capital 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 Firm Capital with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firm Capital and First National.
Diversification Opportunities for Firm Capital and First National
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Firm and First is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Firm Capital Mortgage and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and Firm Capital 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 Firm Capital Mortgage 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 Financial has no effect on the direction of Firm Capital i.e., Firm Capital and First National go up and down completely randomly.
Pair Corralation between Firm Capital and First National
Assuming the 90 days horizon Firm Capital is expected to generate 3.97 times less return on investment than First National. But when comparing it to its historical volatility, Firm Capital Mortgage is 1.22 times less risky than First National. It trades about 0.15 of its potential returns per unit of risk. First National Financial is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 4,012 in First National Financial on August 25, 2024 and sell it today you would earn a total of 441.00 from holding First National Financial or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Firm Capital Mortgage vs. First National Financial
Performance |
| Timeline |
| Firm Capital Mortgage |
| First National Financial |
Firm Capital and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firm Capital and First National
The main advantage of trading using opposite Firm Capital and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firm Capital 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.| Firm Capital vs. Atrium Mortgage Investment | Firm Capital vs. MCAN Mortgage | Firm Capital vs. Timbercreek Financial Corp | Firm Capital vs. First National Financial |
| First National vs. Exchange Income | First National vs. Atrium Mortgage Investment | First National vs. Equitable Group | First National vs. Timbercreek Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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