Correlation Between First Foundation and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Foundation and Dow Jones 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 Foundation and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Foundation and Dow Jones Industrial, you can compare the effects of market volatilities on First Foundation and Dow Jones 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 Foundation with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Foundation and Dow Jones.
Diversification Opportunities for First Foundation and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and First Foundation 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 Foundation are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of First Foundation i.e., First Foundation and Dow Jones go up and down completely randomly.
Pair Corralation between First Foundation and Dow Jones
Given the investment horizon of 90 days First Foundation is expected to generate 4.66 times more return on investment than Dow Jones. However, First Foundation is 4.66 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 673.00 in First Foundation on September 1, 2024 and sell it today you would earn a total of 122.00 from holding First Foundation or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Foundation vs. Dow Jones Industrial
Performance |
| Timeline |
First Foundation and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Foundation
Pair trading matchups for First Foundation
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Foundation and Dow Jones
The main advantage of trading using opposite First Foundation and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Foundation position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| First Foundation vs. Veritex Holdings | First Foundation vs. ConnectOne Bancorp | First Foundation vs. The First Bancshares, | First Foundation vs. First Mid Illinois |
| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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