Correlation Between First National and Mako Mining

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

Diversification Opportunities for First National and Mako Mining

-0.58

Correlation Coefficient

First National  Mako Mining

Excellent diversification

The 3 months correlation between First and Mako is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Mako Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mako Mining 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 Mako Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mako Mining Corp has no effect on the direction of First National i.e., First National and Mako Mining go up and down completely randomly.

Pair Corralation between First National and Mako Mining

Assuming the 90 days trading horizon First National Financial is expected to generate 1.16 times more return on investment than Mako Mining. However, First National is 1.16 times more volatile than Mako Mining Corp. It trades about 0.14 of its potential returns per unit of risk. Mako Mining Corp is currently generating about -0.21 per unit of risk. If you would invest  1,479  in First National Financial on September 22, 2024 and sell it today you would earn a total of  91.00  from holding First National Financial or generate 6.15% return on investment over 90 days.

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

First National Financial  vs.  Mako Mining Corp

First National Financial

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mako Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mako Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Mako Mining is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First National and Mako Mining

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

The idea behind First National Financial and Mako Mining 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.