Correlation Between First State and Global Acquisitions

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

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

Diversification Opportunities for First State and Global Acquisitions

0.72

Correlation Coefficient

First State  Global Acquisitions

Poor diversification

The 3 months correlation between First and Global is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Global Acquisitions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Acquisitions and First State 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 State Financial are associated (or correlated) with Global Acquisitions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Acquisitions has no effect on the direction of First State i.e., First State and Global Acquisitions go up and down completely randomly.

Pair Corralation between First State and Global Acquisitions

If you would invest  64.00  in Global Acquisitions on September 12, 2024 and sell it today you would earn a total of  97.00  from holding Global Acquisitions or generate 151.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

First State Financial  vs.  Global Acquisitions

First State Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Acquisitions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Acquisitions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Global Acquisitions reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First State and Global Acquisitions

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

The idea behind First State Financial and Global Acquisitions 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.