Correlation Between Fentura Financial and PSB Holdings

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

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

Diversification Opportunities for Fentura Financial and PSB Holdings

0.68

Correlation Coefficient

Fentura Financial  PSB Holdings

Poor diversification

The 3 months correlation between Fentura and PSB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fentura Financial and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings and Fentura 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 Fentura Financial are associated (or correlated) with PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Fentura Financial i.e., Fentura Financial and PSB Holdings go up and down completely randomly.

Pair Corralation between Fentura Financial and PSB Holdings

Given the investment horizon of 90 days Fentura Financial is expected to generate 1.39 times more return on investment than PSB Holdings. However, Fentura Financial is 1.39 times more volatile than PSB Holdings. It trades about -0.19 of its potential returns per unit of risk. PSB Holdings is currently generating about -0.33 per unit of risk. If you would invest  4,453  in Fentura Financial on September 22, 2024 and sell it today you would lose (228.00) from holding Fentura Financial or give up 5.12% of portfolio value over 90 days.

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

Fentura Financial  vs.  PSB Holdings

Fentura Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fentura Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fentura Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PSB Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PSB Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, PSB Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fentura Financial and PSB Holdings

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

The idea behind Fentura Financial and PSB 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.