Correlation Between First National and E Split

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

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

Diversification Opportunities for First National and E Split

0.68

Correlation Coefficient

First National  E Split

Poor diversification

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

Pair Corralation between First National and E Split

Assuming the 90 days trading horizon First National Financial is expected to generate 2.87 times more return on investment than E Split. However, First National is 2.87 times more volatile than E Split Corp. It trades about 0.13 of its potential returns per unit of risk. E Split Corp is currently generating about 0.08 per unit of risk. If you would invest  1,484  in First National Financial on September 21, 2024 and sell it today you would earn a total of  86.00  from holding First National Financial or generate 5.8% return on investment over 90 days.

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

First National Financial  vs.  E Split Corp

First National Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

E Split Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, E Split may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First National and E Split

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

The idea behind First National Financial and E Split Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.