Correlation Between First National and Highwood Asset

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

Diversification Opportunities for First National and Highwood Asset

0.0

Correlation Coefficient

First National  Highwood Asset

Pay attention - limited upside

The 3 months correlation between First and Highwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Highwood Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwood Asset Management 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 Highwood Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwood Asset Management has no effect on the direction of First National i.e., First National and Highwood Asset go up and down completely randomly.

Pair Corralation between First National and Highwood Asset

Assuming the 90 days trading horizon First National Financial is expected to under-perform the Highwood Asset. But the preferred stock apears to be less risky and, when comparing its historical volatility, First National Financial is 1.26 times less risky than Highwood Asset. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Highwood Asset Management is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  575.00  in Highwood Asset Management on October 12, 2024 and sell it today you would earn a total of  37.00  from holding Highwood Asset Management or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First National Financial  vs.  Highwood Asset Management

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Highwood Asset Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highwood Asset Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First National and Highwood Asset

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

The idea behind First National Financial and Highwood Asset Management 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.