Correlation Between First National and Atrium Mortgage

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

Diversification Opportunities for First National and Atrium Mortgage

-0.39

Correlation Coefficient

First National  Atrium Mortgage

Very good diversification

The 3 months correlation between First and Atrium is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and Atrium Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atrium Mortgage Inve 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 Atrium Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atrium Mortgage Inve has no effect on the direction of First National i.e., First National and Atrium Mortgage go up and down completely randomly.

Pair Corralation between First National and Atrium Mortgage

Assuming the 90 days horizon First National Financial is expected to generate 1.36 times more return on investment than Atrium Mortgage. However, First National is 1.36 times more volatile than Atrium Mortgage Investment. It trades about 0.34 of its potential returns per unit of risk. Atrium Mortgage Investment is currently generating about 0.01 per unit of risk. If you would invest  3,624  in First National Financial on September 4, 2024 and sell it today you would earn a total of  747.00  from holding First National Financial or generate 20.61% 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.  Atrium Mortgage Investment

First National Financial

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First National displayed solid returns over the last few months and may actually be approaching a breakup point.

Atrium Mortgage Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atrium Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Atrium Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First National and Atrium Mortgage

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

The idea behind First National Financial and Atrium Mortgage Investment 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.