Correlation Between First State and Tennessee Valley
Can any of the company-specific risk be diversified away by investing in both First State and Tennessee Valley 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 Tennessee Valley 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 Tennessee Valley Financial, you can compare the effects of market volatilities on First State and Tennessee Valley 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 Tennessee Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of First State and Tennessee Valley.
Diversification Opportunities for First State and Tennessee Valley
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Tennessee is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Tennessee Valley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tennessee Valley Fin 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 Tennessee Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tennessee Valley Fin has no effect on the direction of First State i.e., First State and Tennessee Valley go up and down completely randomly.
Pair Corralation between First State and Tennessee Valley
Given the investment horizon of 90 days First State Financial is expected to generate 7.41 times more return on investment than Tennessee Valley. However, First State is 7.41 times more volatile than Tennessee Valley Financial. It trades about 0.07 of its potential returns per unit of risk. Tennessee Valley Financial is currently generating about 0.0 per unit of risk. If you would invest 4.80 in First State Financial on September 16, 2024 and sell it today you would lose (0.33) from holding First State Financial or give up 6.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 38.65% |
| Values | Daily Returns |
First State Financial vs. Tennessee Valley Financial
Performance |
| Timeline |
| First State Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Tennessee Valley Fin |
First State and Tennessee Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First State and Tennessee Valley
The main advantage of trading using opposite First State and Tennessee Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First State position performs unexpectedly, Tennessee Valley 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 Tennessee Valley will offset losses from the drop in Tennessee Valley's long position.| First State vs. First Interstate BancSystem | First State vs. First Financial Bankshares | First State vs. Independent Bank Group | First State vs. CVB Financial |
| Tennessee Valley vs. Morningstar Unconstrained Allocation | Tennessee Valley vs. Bondbloxx ETF Trust | Tennessee Valley vs. Spring Valley Acquisition | Tennessee Valley vs. Bondbloxx ETF Trust |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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