Correlation Between First American and Credit Suisse

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

By analyzing existing cross correlation between First American Funds and Credit Suisse Strategic, you can compare the effects of market volatilities on First American and Credit Suisse 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 American with a short position of Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Credit Suisse.

Diversification Opportunities for First American and Credit Suisse

0.42

Correlation Coefficient

First American  Credit Suisse

Very weak diversification

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

Pair Corralation between First American and Credit Suisse

Assuming the 90 days horizon First American is expected to generate 1.68 times less return on investment than Credit Suisse. But when comparing it to its historical volatility, First American Funds is 1.2 times less risky than Credit Suisse. It trades about 0.13 of its potential returns per unit of risk. Credit Suisse Strategic is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  889.00  in Credit Suisse Strategic on October 2, 2024 and sell it today you would earn a total of  63.00  from holding Credit Suisse Strategic or generate 7.09% return on investment over 90 days.

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

First American Funds  vs.  Credit Suisse Strategic

First American Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First American Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Credit Suisse Strategic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse Strategic are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Credit Suisse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First American and Credit Suisse

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

The idea behind First American Funds and Credit Suisse Strategic 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.