Correlation Between First State and Root
Can any of the company-specific risk be diversified away by investing in both First State and Root 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 State and Root into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First State Financial and Root Inc, you can compare the effects of market volatilities on First State and Root 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 State with a short position of Root. Check out your portfolio center. Please also check ongoing floating volatility patterns of First State and Root.
Diversification Opportunities for First State and Root
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Root is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Root Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Root Inc and First State 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 State Financial are associated (or correlated) with Root. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Root Inc has no effect on the direction of First State i.e., First State and Root go up and down completely randomly.
Pair Corralation between First State and Root
Given the investment horizon of 90 days First State Financial is expected to generate 5.54 times more return on investment than Root. However, First State is 5.54 times more volatile than Root Inc. It trades about 0.04 of its potential returns per unit of risk. Root Inc is currently generating about -0.21 per unit of risk. If you would invest 3.69 in First State Financial on November 9, 2025 and sell it today you would lose (1.59) from holding First State Financial or give up 43.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.39% |
| Values | Daily Returns |
First State Financial vs. Root Inc
Performance |
| Timeline |
| First State Financial |
| Root Inc |
First State and Root Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First State and Root
The main advantage of trading using opposite First State and Root positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First State position performs unexpectedly, Root 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 Root will offset losses from the drop in Root's long position.| First State vs. First Republic Bank | First State vs. BioCube | First State vs. Trend Exploration I | First State vs. Eastern Goldfields |
| Root vs. Safety Insurance Group | Root vs. Selective Insurance Group | Root vs. Ategrity Specialty Insurance | Root vs. ProAssurance |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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