Correlation Between NYSE Composite and First Interstate
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and First Interstate 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 NYSE Composite and First Interstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and First Interstate BancSystem, you can compare the effects of market volatilities on NYSE Composite and First Interstate 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 NYSE Composite with a short position of First Interstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and First Interstate.
Diversification Opportunities for NYSE Composite and First Interstate
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban and NYSE Composite 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 NYSE Composite are associated (or correlated) with First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of NYSE Composite i.e., NYSE Composite and First Interstate go up and down completely randomly.
Pair Corralation between NYSE Composite and First Interstate
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.36 times less return on investment than First Interstate. But when comparing it to its historical volatility, NYSE Composite is 3.4 times less risky than First Interstate. It trades about 0.11 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,143 in First Interstate BancSystem on August 28, 2024 and sell it today you would earn a total of 1,404 from holding First Interstate BancSystem or generate 65.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. First Interstate BancSystem
Performance |
| Timeline |
NYSE Composite and First Interstate Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
First Interstate BancSystem
Pair trading matchups for First Interstate
Pair Trading with NYSE Composite and First Interstate
The main advantage of trading using opposite NYSE Composite and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, First Interstate 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 Interstate will offset losses from the drop in First Interstate's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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