Correlation Between First National and Lycos Energy
Can any of the company-specific risk be diversified away by investing in both First National and Lycos Energy 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 Lycos Energy 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 Lycos Energy, you can compare the effects of market volatilities on First National and Lycos Energy 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 Lycos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Lycos Energy.
Diversification Opportunities for First National and Lycos Energy
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Lycos is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Lycos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lycos Energy 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 Lycos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lycos Energy has no effect on the direction of First National i.e., First National and Lycos Energy go up and down completely randomly.
Pair Corralation between First National and Lycos Energy
Assuming the 90 days trading horizon First National Financial is expected to generate 0.5 times more return on investment than Lycos Energy. However, First National Financial is 2.0 times less risky than Lycos Energy. It trades about 0.24 of its potential returns per unit of risk. Lycos Energy is currently generating about 0.06 per unit of risk. If you would invest 1,450 in First National Financial on September 5, 2024 and sell it today you would earn a total of 125.00 from holding First National Financial or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
First National Financial vs. Lycos Energy
Performance |
| Timeline |
| First National Financial |
| Lycos Energy |
First National and Lycos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Lycos Energy
The main advantage of trading using opposite First National and Lycos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, Lycos Energy 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 Lycos Energy will offset losses from the drop in Lycos Energy's long position.| First National vs. Apple Inc CDR | First National vs. Microsoft Corp CDR | First National vs. Amazon CDR | First National vs. Alphabet Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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