Correlation Between North American and FIRSTRAND
Can any of the company-specific risk be diversified away by investing in both North American and FIRSTRAND 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 North American and FIRSTRAND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and FIRSTRAND, you can compare the effects of market volatilities on North American and FIRSTRAND 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 North American with a short position of FIRSTRAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and FIRSTRAND.
Diversification Opportunities for North American and FIRSTRAND
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between North and FIRSTRAND is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and FIRSTRAND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRSTRAND and North American 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 North American Construction are associated (or correlated) with FIRSTRAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRSTRAND has no effect on the direction of North American i.e., North American and FIRSTRAND go up and down completely randomly.
Pair Corralation between North American and FIRSTRAND
Assuming the 90 days horizon North American is expected to generate 11.93 times less return on investment than FIRSTRAND. But when comparing it to its historical volatility, North American Construction is 3.5 times less risky than FIRSTRAND. It trades about 0.03 of its potential returns per unit of risk. FIRSTRAND is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 164.00 in FIRSTRAND on September 12, 2024 and sell it today you would earn a total of 260.00 from holding FIRSTRAND or generate 158.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
North American Construction vs. FIRSTRAND
Performance |
| Timeline |
| North American Const |
| FIRSTRAND |
North American and FIRSTRAND Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and FIRSTRAND
The main advantage of trading using opposite North American and FIRSTRAND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, FIRSTRAND 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 FIRSTRAND will offset losses from the drop in FIRSTRAND's long position.| North American vs. Tenaris SA | North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. SIVERS SEMICONDUCTORS AB |
| FIRSTRAND vs. HYDROFARM HLD GRP | FIRSTRAND vs. Granite Construction | FIRSTRAND vs. AGRICULTBK HADR25 YC | FIRSTRAND vs. North American Construction |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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