Correlation Between Employers Holdings and FB Financial

Can any of the company-specific risk be diversified away by investing in both Employers Holdings and FB Financial 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 Employers Holdings and FB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Employers Holdings and FB Financial Corp, you can compare the effects of market volatilities on Employers Holdings and FB Financial 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 Employers Holdings with a short position of FB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and FB Financial.

Diversification Opportunities for Employers Holdings and FB Financial

0.95

Correlation Coefficient

Employers Holdings  FB Financial

Almost no diversification

The 3 months correlation between Employers and FBK is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp and Employers Holdings 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 Employers Holdings are associated (or correlated) with FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Employers Holdings i.e., Employers Holdings and FB Financial go up and down completely randomly.

Pair Corralation between Employers Holdings and FB Financial

Considering the 90-day investment horizon Employers Holdings is expected to generate 0.65 times more return on investment than FB Financial. However, Employers Holdings is 1.54 times less risky than FB Financial. It trades about -0.28 of its potential returns per unit of risk. FB Financial Corp is currently generating about -0.29 per unit of risk. If you would invest  5,194  in Employers Holdings on October 11, 2024 and sell it today you would lose (318.00) from holding Employers Holdings or give up 6.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Employers Holdings  vs.  FB Financial Corp

Employers Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Employers Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

FB Financial Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FB Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, FB Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Employers Holdings and FB Financial

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

The idea behind Employers Holdings and FB Financial Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.