Correlation Between Financial and First National
Can any of the company-specific risk be diversified away by investing in both Financial and First National 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 Financial and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial 15 Split and First National Financial, you can compare the effects of market volatilities on Financial and First National 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 Financial with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and First National.
Diversification Opportunities for Financial and First National
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Financial and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and Financial 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 Financial 15 Split are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Financial i.e., Financial and First National go up and down completely randomly.
Pair Corralation between Financial and First National
Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.26 times more return on investment than First National. However, Financial 15 Split is 3.86 times less risky than First National. It trades about 0.25 of its potential returns per unit of risk. First National Financial is currently generating about 0.03 per unit of risk. If you would invest 982.00 in Financial 15 Split on September 1, 2024 and sell it today you would earn a total of 77.00 from holding Financial 15 Split or generate 7.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial 15 Split vs. First National Financial
Performance |
| Timeline |
| Financial 15 Split |
| First National Financial |
Financial and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial and First National
The main advantage of trading using opposite Financial and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| Financial vs. North American Financial | Financial vs. Dividend 15 Split | Financial vs. Dividend Growth Split | Financial vs. Dividend 15 Split |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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