Correlation Between First National and IA Financial
Can any of the company-specific risk be diversified away by investing in both First National and IA Financial 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 IA Financial 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 iA Financial, you can compare the effects of market volatilities on First National and IA Financial 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 IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and IA Financial.
Diversification Opportunities for First National and IA Financial
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and IAG is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of First National i.e., First National and IA Financial go up and down completely randomly.
Pair Corralation between First National and IA Financial
Assuming the 90 days trading horizon First National is expected to generate 3.9 times less return on investment than IA Financial. But when comparing it to its historical volatility, First National Financial is 3.91 times less risky than IA Financial. It trades about 0.17 of its potential returns per unit of risk. iA Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,135 in iA Financial on August 29, 2024 and sell it today you would earn a total of 2,093 from holding iA Financial or generate 18.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Financial vs. iA Financial
Performance |
| Timeline |
| First National Financial |
| iA Financial |
First National and IA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and IA Financial
The main advantage of trading using opposite First National and IA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, IA Financial 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 IA Financial will offset losses from the drop in IA Financial's long position.| First National vs. Walmart Inc CDR | First National vs. Amazon CDR | First National vs. Berkshire Hathaway CDR | First National vs. UnitedHealth Group CDR |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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