Correlation Between FB Financial and Employers Holdings

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

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

Diversification Opportunities for FB Financial and Employers Holdings

0.95

Correlation Coefficient

FB Financial  Employers Holdings

Almost no diversification

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

Pair Corralation between FB Financial and Employers Holdings

Considering the 90-day investment horizon FB Financial Corp is expected to generate 1.71 times more return on investment than Employers Holdings. However, FB Financial is 1.71 times more volatile than Employers Holdings. It trades about 0.04 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.03 per unit of risk. If you would invest  3,537  in FB Financial Corp on October 11, 2024 and sell it today you would earn a total of  1,490  from holding FB Financial Corp or generate 42.13% return on investment over 90 days.

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

FB Financial Corp  vs.  Employers Holdings

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.

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.

Pair Trading with FB Financial and Employers Holdings

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

The idea behind FB Financial Corp and Employers Holdings 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .