Correlation Between First American and Fpa New

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

By analyzing existing cross correlation between First American Funds and Fpa New Income, you can compare the effects of market volatilities on First American and Fpa New 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 American with a short position of Fpa New. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Fpa New.

Diversification Opportunities for First American and Fpa New

-0.75

Correlation Coefficient

First American  Fpa New

Pay attention - limited upside

The 3 months correlation between First and Fpa is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Fpa New Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fpa New Income and First American 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 American Funds are associated (or correlated) with Fpa New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fpa New Income has no effect on the direction of First American i.e., First American and Fpa New go up and down completely randomly.

Pair Corralation between First American and Fpa New

Assuming the 90 days horizon First American Funds is expected to generate 0.75 times more return on investment than Fpa New. However, First American Funds is 1.34 times less risky than Fpa New. It trades about 0.13 of its potential returns per unit of risk. Fpa New Income is currently generating about -0.08 per unit of risk. If you would invest  99.00  in First American Funds on September 12, 2024 and sell it today you would earn a total of  1.00  from holding First American Funds or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

First American Funds  vs.  Fpa New Income

First American Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First American Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fpa New Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fpa New Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fpa New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First American and Fpa New

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

The idea behind First American Funds and Fpa New Income 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.