Correlation Between First National and Rover Metals

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

Diversification Opportunities for First National and Rover Metals

-0.07

Correlation Coefficient

First National  Rover Metals

Good diversification

The 3 months correlation between First and Rover is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Rover Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rover Metals 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 Rover Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rover Metals Corp has no effect on the direction of First National i.e., First National and Rover Metals go up and down completely randomly.

Pair Corralation between First National and Rover Metals

Assuming the 90 days trading horizon First National Financial is expected to under-perform the Rover Metals. But the preferred stock apears to be less risky and, when comparing its historical volatility, First National Financial is 19.42 times less risky than Rover Metals. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Rover Metals Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Rover Metals Corp on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Rover Metals Corp or generate 0.0% return on investment over 90 days.

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

First National Financial  vs.  Rover Metals Corp

First National Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Financial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Rover Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rover Metals Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Rover Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First National and Rover Metals

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

The idea behind First National Financial and Rover Metals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.