Correlation Between F M and First Reliance
Can any of the company-specific risk be diversified away by investing in both F M and First Reliance 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 F M and First Reliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between F M Bank and First Reliance Bancshares, you can compare the effects of market volatilities on F M and First Reliance 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 F M with a short position of First Reliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of F M and First Reliance.
Diversification Opportunities for F M and First Reliance
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FMBM and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding F M Bank and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance Bancshares and F M 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 F M Bank are associated (or correlated) with First Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of F M i.e., F M and First Reliance go up and down completely randomly.
Pair Corralation between F M and First Reliance
Given the investment horizon of 90 days F M Bank is expected to under-perform the First Reliance. In addition to that, F M is 1.19 times more volatile than First Reliance Bancshares. It trades about -0.08 of its total potential returns per unit of risk. First Reliance Bancshares is currently generating about -0.02 per unit of volatility. If you would invest 1,000.00 in First Reliance Bancshares on November 15, 2024 and sell it today you would lose (11.00) from holding First Reliance Bancshares or give up 1.1% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
F M Bank vs. First Reliance Bancshares
Performance |
Timeline |
F M Bank |
First Reliance Bancshares |
F M and First Reliance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with F M and First Reliance
The main advantage of trading using opposite F M and First Reliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F M position performs unexpectedly, First Reliance 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 Reliance will offset losses from the drop in First Reliance's long position.The idea behind F M Bank and First Reliance Bancshares 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.First Reliance vs. FNB Inc | ||
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Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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