Correlation Between FNB and Woodlands Financial

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

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

Diversification Opportunities for FNB and Woodlands Financial

0.46

Correlation Coefficient

FNB  Woodlands Financial

Very weak diversification

The 3 months correlation between FNB and Woodlands is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding FNB Inc and Woodlands Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodlands Financial and FNB 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 FNB Inc are associated (or correlated) with Woodlands Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodlands Financial has no effect on the direction of FNB i.e., FNB and Woodlands Financial go up and down completely randomly.

Pair Corralation between FNB and Woodlands Financial

Given the investment horizon of 90 days FNB Inc is expected to generate 1.01 times more return on investment than Woodlands Financial. However, FNB is 1.01 times more volatile than Woodlands Financial Services. It trades about 0.08 of its potential returns per unit of risk. Woodlands Financial Services is currently generating about 0.02 per unit of risk. If you would invest  2,300  in FNB Inc on September 4, 2024 and sell it today you would earn a total of  200.00  from holding FNB Inc or generate 8.7% return on investment over 90 days.

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

FNB Inc  vs.  Woodlands Financial Services

FNB Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FNB Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FNB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Woodlands Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Woodlands Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FNB and Woodlands Financial

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

The idea behind FNB Inc and Woodlands Financial Services 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.