Correlation Between FIRST MUTUAL and FBC HOLDINGS
Can any of the company-specific risk be diversified away by investing in both FIRST MUTUAL and FBC 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 FIRST MUTUAL and FBC HOLDINGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRST MUTUAL PROPERTIES and FBC HOLDINGS LIMITED, you can compare the effects of market volatilities on FIRST MUTUAL and FBC 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 FIRST MUTUAL with a short position of FBC HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST MUTUAL and FBC HOLDINGS.
Diversification Opportunities for FIRST MUTUAL and FBC HOLDINGS
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FIRST and FBC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding FIRST MUTUAL PROPERTIES and FBC HOLDINGS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FBC HOLDINGS LIMITED and FIRST MUTUAL 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 MUTUAL PROPERTIES are associated (or correlated) with FBC HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FBC HOLDINGS LIMITED has no effect on the direction of FIRST MUTUAL i.e., FIRST MUTUAL and FBC HOLDINGS go up and down completely randomly.
Pair Corralation between FIRST MUTUAL and FBC HOLDINGS
Assuming the 90 days trading horizon FIRST MUTUAL PROPERTIES is expected to generate 1.1 times more return on investment than FBC HOLDINGS. However, FIRST MUTUAL is 1.1 times more volatile than FBC HOLDINGS LIMITED. It trades about 0.34 of its potential returns per unit of risk. FBC HOLDINGS LIMITED is currently generating about 0.25 per unit of risk. If you would invest 3,060 in FIRST MUTUAL PROPERTIES on August 31, 2024 and sell it today you would earn a total of 6,440 from holding FIRST MUTUAL PROPERTIES or generate 210.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIRST MUTUAL PROPERTIES vs. FBC HOLDINGS LIMITED
Performance |
| Timeline |
| FIRST MUTUAL PROPERTIES |
| FBC HOLDINGS LIMITED |
FIRST MUTUAL and FBC HOLDINGS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIRST MUTUAL and FBC HOLDINGS
The main advantage of trading using opposite FIRST MUTUAL and FBC HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST MUTUAL position performs unexpectedly, FBC 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 FBC HOLDINGS will offset losses from the drop in FBC HOLDINGS's long position.| FIRST MUTUAL vs. FIRST MUTUAL HOLDINGS | FIRST MUTUAL vs. STAR AFRICA PORATION | FIRST MUTUAL vs. CAFCA LIMITED | FIRST MUTUAL vs. AFRICAN DISTILLERS LIMITED |
| FBC HOLDINGS vs. STAR AFRICA PORATION | FBC HOLDINGS vs. CAFCA LIMITED | FBC HOLDINGS vs. FIRST MUTUAL PROPERTIES | FBC HOLDINGS vs. AFRICAN DISTILLERS LIMITED |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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