Correlation Between FFW and National Capital
Can any of the company-specific risk be diversified away by investing in both FFW and National Capital 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 FFW and National Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FFW Corporation and National Capital Bank, you can compare the effects of market volatilities on FFW and National Capital 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 FFW with a short position of National Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of FFW and National Capital.
Diversification Opportunities for FFW and National Capital
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FFW and National is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding FFW Corp. and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank and FFW 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 FFW Corporation are associated (or correlated) with National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of FFW i.e., FFW and National Capital go up and down completely randomly.
Pair Corralation between FFW and National Capital
Given the investment horizon of 90 days FFW is expected to generate 887.06 times less return on investment than National Capital. But when comparing it to its historical volatility, FFW Corporation is 35.87 times less risky than National Capital. It trades about 0.01 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 17,000 in National Capital Bank on August 30, 2024 and sell it today you would earn a total of 7,000 from holding National Capital Bank or generate 41.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.72% |
| Values | Daily Returns |
FFW Corp. vs. National Capital Bank
Performance |
| Timeline |
| FFW Corporation |
| National Capital Bank |
FFW and National Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FFW and National Capital
The main advantage of trading using opposite FFW and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FFW position performs unexpectedly, National Capital 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 National Capital will offset losses from the drop in National Capital's long position.| FFW vs. Invesco High Income | FFW vs. Blackrock Muniholdings Ny | FFW vs. Nuveen California Select | FFW vs. MFS Investment Grade |
| National Capital vs. Invesco High Income | National Capital vs. Blackrock Muniholdings Ny | National Capital vs. Nuveen California Select | National Capital vs. MFS Investment Grade |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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