Correlation Between First American and DISTRICT METALS
Can any of the company-specific risk be diversified away by investing in both First American and DISTRICT METALS 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 American and DISTRICT METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Financial and DISTRICT METALS, you can compare the effects of market volatilities on First American and DISTRICT METALS 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 American with a short position of DISTRICT METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and DISTRICT METALS.
Diversification Opportunities for First American and DISTRICT METALS
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and DISTRICT is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding First American Financial and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS and First 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 First American Financial are associated (or correlated) with DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of First American i.e., First American and DISTRICT METALS go up and down completely randomly.
Pair Corralation between First American and DISTRICT METALS
Assuming the 90 days horizon First American is expected to generate 7.47 times less return on investment than DISTRICT METALS. But when comparing it to its historical volatility, First American Financial is 3.27 times less risky than DISTRICT METALS. It trades about 0.1 of its potential returns per unit of risk. DISTRICT METALS is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 20.00 in DISTRICT METALS on September 15, 2024 and sell it today you would earn a total of 4.00 from holding DISTRICT METALS or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First American Financial vs. DISTRICT METALS
Performance |
| Timeline |
| First American Financial |
| DISTRICT METALS |
First American and DISTRICT METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and DISTRICT METALS
The main advantage of trading using opposite First American and DISTRICT METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, DISTRICT METALS 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 DISTRICT METALS will offset losses from the drop in DISTRICT METALS's long position.| First American vs. MGIC Investment | First American vs. Lancashire Holdings Limited | First American vs. Trisura Group |
| DISTRICT METALS vs. American Lithium Corp | DISTRICT METALS vs. ADRIATIC METALS LS 013355 | DISTRICT METALS vs. Superior Plus Corp | DISTRICT METALS vs. SIVERS SEMICONDUCTORS AB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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