Correlation Between Financial and North American

Can any of the company-specific risk be diversified away by investing in both Financial and North American 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 Financial and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Financial 15 Split and North American Financial, you can compare the effects of market volatilities on Financial and North American 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 Financial with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and North American.

Diversification Opportunities for Financial and North American

0.89

Correlation Coefficient

Financial  North American

Very poor diversification

The 3 months correlation between Financial and North is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and Financial 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 Financial 15 Split are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Financial i.e., Financial and North American go up and down completely randomly.

Pair Corralation between Financial and North American

Assuming the 90 days horizon Financial 15 Split is expected to generate 0.87 times more return on investment than North American. However, Financial 15 Split is 1.15 times less risky than North American. It trades about -0.03 of its potential returns per unit of risk. North American Financial is currently generating about -0.04 per unit of risk. If you would invest  642.00  in Financial 15 Split on December 30, 2024 and sell it today you would lose (35.00) from holding Financial 15 Split or give up 5.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	83.33%
Values	Daily Returns

Financial 15 Split  vs.  North American Financial

Financial 15 Split

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial 15 Split has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Financial and North American

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

The idea behind Financial 15 Split and North American Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.