Correlation Between First National and Happy Creek
Can any of the company-specific risk be diversified away by investing in both First National and Happy Creek 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 National and Happy Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Financial and Happy Creek Minerals, you can compare the effects of market volatilities on First National and Happy Creek 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 National with a short position of Happy Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Happy Creek.
Diversification Opportunities for First National and Happy Creek
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Happy is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Happy Creek Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Happy Creek Minerals and First National 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 National Financial are associated (or correlated) with Happy Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Happy Creek Minerals has no effect on the direction of First National i.e., First National and Happy Creek go up and down completely randomly.
Pair Corralation between First National and Happy Creek
Assuming the 90 days trading horizon First National is expected to generate 2.76 times less return on investment than Happy Creek. But when comparing it to its historical volatility, First National Financial is 8.78 times less risky than Happy Creek. It trades about 0.12 of its potential returns per unit of risk. Happy Creek Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Happy Creek Minerals on September 14, 2024 and sell it today you would lose (0.50) from holding Happy Creek Minerals or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
First National Financial vs. Happy Creek Minerals
Performance |
| Timeline |
| First National Financial |
| Happy Creek Minerals |
First National and Happy Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Happy Creek
The main advantage of trading using opposite First National and Happy Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, Happy Creek 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 Happy Creek will offset losses from the drop in Happy Creek's long position.| First National vs. Economic Investment Trust | First National vs. Stampede Drilling | First National vs. Altair Resources | First National vs. Pembina Pipeline Corp |
| Happy Creek vs. Oculus VisionTech | Happy Creek vs. DIRTT Environmental Solutions | Happy Creek vs. First National Financial | Happy Creek vs. Xtract One Technologies |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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