Correlation Between Equitable and First National

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

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

Diversification Opportunities for Equitable and First National

0.42

Correlation Coefficient

Equitable  First National

Very weak diversification

The 3 months correlation between Equitable and First is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Group and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and Equitable 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 Equitable Group are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Equitable i.e., Equitable and First National go up and down completely randomly.

Pair Corralation between Equitable and First National

Assuming the 90 days trading horizon Equitable Group is expected to under-perform the First National. In addition to that, Equitable is 1.82 times more volatile than First National Financial. It trades about -0.08 of its total potential returns per unit of risk. First National Financial is currently generating about -0.1 per unit of volatility. If you would invest  4,304  in First National Financial on December 1, 2024 and sell it today you would lose (241.00) from holding First National Financial or give up 5.6% of portfolio value over 90 days.

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

Equitable Group  vs.  First National Financial

Equitable Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equitable Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First National Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Equitable and First National

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

The idea behind Equitable Group and First National Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.