Correlation Between First National and Laurentian Bank
Can any of the company-specific risk be diversified away by investing in both First National and Laurentian Bank 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 Laurentian Bank 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 Laurentian Bank, you can compare the effects of market volatilities on First National and Laurentian Bank 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 Laurentian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Laurentian Bank.
Diversification Opportunities for First National and Laurentian Bank
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Laurentian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Laurentian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laurentian Bank 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 Laurentian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laurentian Bank has no effect on the direction of First National i.e., First National and Laurentian Bank go up and down completely randomly.
Pair Corralation between First National and Laurentian Bank
Assuming the 90 days trading horizon First National is expected to generate 1.5 times less return on investment than Laurentian Bank. But when comparing it to its historical volatility, First National Financial is 1.63 times less risky than Laurentian Bank. It trades about 0.06 of its potential returns per unit of risk. Laurentian Bank is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,590 in Laurentian Bank on September 1, 2024 and sell it today you would earn a total of 375.00 from holding Laurentian Bank or generate 14.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Financial vs. Laurentian Bank
Performance |
| Timeline |
| First National Financial |
| Laurentian Bank |
First National and Laurentian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Laurentian Bank
The main advantage of trading using opposite First National and Laurentian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, Laurentian Bank 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 Laurentian Bank will offset losses from the drop in Laurentian Bank's long position.| First National vs. Champion Gaming Group | First National vs. Endeavour Silver Corp | First National vs. Nicola Mining | First National vs. Perseus Mining |
| Laurentian Bank vs. Canadian Western Bank | Laurentian Bank vs. National Bank of | Laurentian Bank vs. Canadian Imperial Bank | Laurentian Bank vs. Great West Lifeco |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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