Correlation Between First National and Winpak
Can any of the company-specific risk be diversified away by investing in both First National and Winpak 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 Winpak 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 Winpak, you can compare the effects of market volatilities on First National and Winpak 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 Winpak. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Winpak.
Diversification Opportunities for First National and Winpak
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Winpak is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Winpak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winpak 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 Winpak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winpak has no effect on the direction of First National i.e., First National and Winpak go up and down completely randomly.
Pair Corralation between First National and Winpak
Assuming the 90 days trading horizon First National Financial is expected to generate 0.68 times more return on investment than Winpak. However, First National Financial is 1.47 times less risky than Winpak. It trades about 0.08 of its potential returns per unit of risk. Winpak is currently generating about 0.05 per unit of risk. If you would invest 1,157 in First National Financial on August 28, 2024 and sell it today you would earn a total of 291.00 from holding First National Financial or generate 25.15% 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. Winpak
Performance |
| Timeline |
| First National Financial |
| Winpak |
First National and Winpak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Winpak
The main advantage of trading using opposite First National and Winpak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National position performs unexpectedly, Winpak 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 Winpak will offset losses from the drop in Winpak's long position.| First National vs. Forstrong Global Income | First National vs. BMO Aggregate Bond | First National vs. Terreno Resources Corp | First National vs. iShares Canadian HYBrid |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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