Correlation Between First National and Sabio Holdings

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

Diversification Opportunities for First National and Sabio Holdings

-0.24

Correlation Coefficient

First National  Sabio Holdings

Very good diversification

The 3 months correlation between First and Sabio is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Sabio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabio Holdings 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 Sabio Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabio Holdings has no effect on the direction of First National i.e., First National and Sabio Holdings go up and down completely randomly.

Pair Corralation between First National and Sabio Holdings

Assuming the 90 days trading horizon First National Financial is expected to under-perform the Sabio Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, First National Financial is 1.49 times less risky than Sabio Holdings. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Sabio Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Sabio Holdings on October 9, 2024 and sell it today you would earn a total of  4.00  from holding Sabio Holdings or generate 8.51% 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.  Sabio Holdings

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.

Sabio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Sabio Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First National and Sabio Holdings

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

The idea behind First National Financial and Sabio Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.