Correlation Between FIRST MUTUAL and ZB FINANCIAL

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

By analyzing existing cross correlation between FIRST MUTUAL PROPERTIES and ZB FINANCIAL HOLDINGS, you can compare the effects of market volatilities on FIRST MUTUAL and ZB 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 FIRST MUTUAL with a short position of ZB FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST MUTUAL and ZB FINANCIAL.

Diversification Opportunities for FIRST MUTUAL and ZB FINANCIAL

0.49

Correlation Coefficient

FIRST MUTUAL  ZB FINANCIAL

Very weak diversification

The 3 months correlation between FIRST and ZBFH is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding FIRST MUTUAL PROPERTIES and ZB FINANCIAL HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZB FINANCIAL HOLDINGS and FIRST MUTUAL 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 MUTUAL PROPERTIES are associated (or correlated) with ZB FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZB FINANCIAL HOLDINGS has no effect on the direction of FIRST MUTUAL i.e., FIRST MUTUAL and ZB FINANCIAL go up and down completely randomly.

Pair Corralation between FIRST MUTUAL and ZB FINANCIAL

Assuming the 90 days trading horizon FIRST MUTUAL PROPERTIES is expected to generate 0.4 times more return on investment than ZB FINANCIAL. However, FIRST MUTUAL PROPERTIES is 2.49 times less risky than ZB FINANCIAL. It trades about -0.15 of its potential returns per unit of risk. ZB FINANCIAL HOLDINGS is currently generating about -0.1 per unit of risk. If you would invest  12,310  in FIRST MUTUAL PROPERTIES on December 25, 2024 and sell it today you would lose (2,338) from holding FIRST MUTUAL PROPERTIES or give up 18.99% of portfolio value over 90 days.

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

FIRST MUTUAL PROPERTIES  vs.  ZB FINANCIAL HOLDINGS

FIRST MUTUAL PROPERTIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days FIRST MUTUAL PROPERTIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ZB FINANCIAL HOLDINGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ZB FINANCIAL HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with FIRST MUTUAL and ZB FINANCIAL

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

The idea behind FIRST MUTUAL PROPERTIES and ZB FINANCIAL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.