Correlation Between First National and Globex Mining

Can any of the company-specific risk be diversified away by investing in both First National and Globex Mining 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 Globex Mining 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 Globex Mining Enterprises, you can compare the effects of market volatilities on First National and Globex Mining 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 Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Globex Mining.

Diversification Opportunities for First National and Globex Mining

0.38

Correlation Coefficient

First National  Globex Mining

Weak diversification

The 3 months correlation between First and Globex is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of First National i.e., First National and Globex Mining go up and down completely randomly.

Pair Corralation between First National and Globex Mining

Assuming the 90 days trading horizon First National is expected to generate 4.21 times less return on investment than Globex Mining. But when comparing it to its historical volatility, First National Financial is 2.49 times less risky than Globex Mining. It trades about 0.11 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Globex Mining Enterprises on September 1, 2024 and sell it today you would earn a total of  9.00  from holding Globex Mining Enterprises or generate 8.82% return on investment over 90 days.

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

First National Financial  vs.  Globex Mining Enterprises

First National Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 4 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Globex Mining Enterprises

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Globex Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First National and Globex Mining

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

The idea behind First National Financial and Globex Mining Enterprises 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.