Correlation Between FIRST SAVINGS and Postal Savings

Can any of the company-specific risk be diversified away by investing in both FIRST SAVINGS and Postal Savings 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 SAVINGS and Postal Savings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FIRST SAVINGS FINL and Postal Savings Bank, you can compare the effects of market volatilities on FIRST SAVINGS and Postal Savings 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 SAVINGS with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST SAVINGS and Postal Savings.

Diversification Opportunities for FIRST SAVINGS and Postal Savings

-0.74

Correlation Coefficient

FIRST SAVINGS  Postal Savings

Pay attention - limited upside

The 3 months correlation between FIRST and Postal is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding FIRST SAVINGS FINL and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and FIRST SAVINGS 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 SAVINGS FINL are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of FIRST SAVINGS i.e., FIRST SAVINGS and Postal Savings go up and down completely randomly.

Pair Corralation between FIRST SAVINGS and Postal Savings

Assuming the 90 days horizon FIRST SAVINGS FINL is expected to under-perform the Postal Savings. But the stock apears to be less risky and, when comparing its historical volatility, FIRST SAVINGS FINL is 2.01 times less risky than Postal Savings. The stock trades about -0.01 of its potential returns per unit of risk. The Postal Savings Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Postal Savings Bank on December 21, 2024 and sell it today you would earn a total of  21.00  from holding Postal Savings Bank or generate 52.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FIRST SAVINGS FINL  vs.  Postal Savings Bank

FIRST SAVINGS FINL

Risk-Adjusted Performance

Very Weak

Over the last 90 days FIRST SAVINGS FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FIRST SAVINGS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Postal Savings Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Postal Savings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FIRST SAVINGS and Postal Savings

The main advantage of trading using opposite FIRST SAVINGS and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST SAVINGS position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.

The idea behind FIRST SAVINGS FINL and Postal Savings Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.