Correlation Between Main Street and FNB
Can any of the company-specific risk be diversified away by investing in both Main Street and FNB 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 Main Street and FNB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Financial and FNB Inc, you can compare the effects of market volatilities on Main Street and FNB 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 Main Street with a short position of FNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and FNB.
Diversification Opportunities for Main Street and FNB
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and FNB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc and Main Street 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 Main Street Financial are associated (or correlated) with FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of Main Street i.e., Main Street and FNB go up and down completely randomly.
Pair Corralation between Main Street and FNB
Given the investment horizon of 90 days Main Street Financial is expected to under-perform the FNB. But the otc stock apears to be less risky and, when comparing its historical volatility, Main Street Financial is 1.74 times less risky than FNB. The otc stock trades about -0.04 of its potential returns per unit of risk. The FNB Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,415 in FNB Inc on August 26, 2024 and sell it today you would earn a total of 85.00 from holding FNB Inc or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 58.12% |
| Values | Daily Returns |
Main Street Financial vs. FNB Inc
Performance |
| Timeline |
| Main Street Financial |
| FNB Inc |
Main Street and FNB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and FNB
The main advantage of trading using opposite Main Street and FNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, FNB 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 FNB will offset losses from the drop in FNB's long position.| Main Street vs. CCFNB Bancorp | Main Street vs. Burke Herbert Financial | Main Street vs. First IC | Main Street vs. Enterprise Financial Services |
| FNB vs. Standard Bank Group | FNB vs. PSB Holdings | FNB vs. United Overseas Bank | FNB vs. Turkiye Garanti Bankasi |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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