Correlation Between FFW and PSB Holdings
Can any of the company-specific risk be diversified away by investing in both FFW and PSB Holdings 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 PSB Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FFW Corporation and PSB Holdings, you can compare the effects of market volatilities on FFW and PSB Holdings 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 PSB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FFW and PSB Holdings.
Diversification Opportunities for FFW and PSB Holdings
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FFW and PSB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding FFW Corp. and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings 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 PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of FFW i.e., FFW and PSB Holdings go up and down completely randomly.
Pair Corralation between FFW and PSB Holdings
Given the investment horizon of 90 days FFW is expected to generate 1633.5 times less return on investment than PSB Holdings. But when comparing it to its historical volatility, FFW Corporation is 5.84 times less risky than PSB Holdings. It trades about 0.0 of its potential returns per unit of risk. PSB Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,600 in PSB Holdings on August 26, 2024 and sell it today you would earn a total of 190.00 from holding PSB Holdings or generate 7.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FFW Corp. vs. PSB Holdings
Performance |
| Timeline |
| FFW Corporation |
| PSB Holdings |
FFW and PSB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FFW and PSB Holdings
The main advantage of trading using opposite FFW and PSB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FFW position performs unexpectedly, PSB Holdings 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 PSB Holdings will offset losses from the drop in PSB Holdings' long position.| FFW vs. First Farmers Financial | FFW vs. Farmers Merchants Bancorp | FFW vs. Lakeland Financial | FFW vs. Eagle Financial Services |
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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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