Correlation Between FIRST SAVINGS and SPECTRAL MEDICAL

Can any of the company-specific risk be diversified away by investing in both FIRST SAVINGS and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 SPECTRAL MEDICAL, you can compare the effects of market volatilities on FIRST SAVINGS and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST SAVINGS and SPECTRAL MEDICAL.

Diversification Opportunities for FIRST SAVINGS and SPECTRAL MEDICAL

-0.23

Correlation Coefficient

FIRST SAVINGS  SPECTRAL MEDICAL

Very good diversification

The 3 months correlation between FIRST and SPECTRAL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding FIRST SAVINGS FINL and SPECTRAL MEDICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPECTRAL MEDICAL 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 SPECTRAL MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPECTRAL MEDICAL has no effect on the direction of FIRST SAVINGS i.e., FIRST SAVINGS and SPECTRAL MEDICAL go up and down completely randomly.

Pair Corralation between FIRST SAVINGS and SPECTRAL MEDICAL

Assuming the 90 days horizon FIRST SAVINGS FINL is expected to generate 0.43 times more return on investment than SPECTRAL MEDICAL. However, FIRST SAVINGS FINL is 2.34 times less risky than SPECTRAL MEDICAL. It trades about 0.1 of its potential returns per unit of risk. SPECTRAL MEDICAL is currently generating about 0.04 per unit of risk. If you would invest  1,136  in FIRST SAVINGS FINL on October 24, 2024 and sell it today you would earn a total of  1,124  from holding FIRST SAVINGS FINL or generate 98.94% return on investment over 90 days.

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

FIRST SAVINGS FINL  vs.  SPECTRAL MEDICAL

FIRST SAVINGS FINL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SAVINGS FINL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FIRST SAVINGS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPECTRAL MEDICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPECTRAL MEDICAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FIRST SAVINGS and SPECTRAL MEDICAL

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

The idea behind FIRST SAVINGS FINL and SPECTRAL MEDICAL 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.