Correlation Between First State and Arlington Asset

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

Diversification Opportunities for First State and Arlington Asset

0.69

Correlation Coefficient

First State  Arlington Asset

Poor diversification

The 3 months correlation between First and Arlington is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Arlington Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlington Asset Inve 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 Arlington Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlington Asset Inve has no effect on the direction of First State i.e., First State and Arlington Asset go up and down completely randomly.

Pair Corralation between First State and Arlington Asset

If you would invest  2,443  in Arlington Asset Investment on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Arlington Asset Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

First State Financial  vs.  Arlington Asset Investment

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Arlington Asset Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arlington Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Arlington Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First State and Arlington Asset

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

The idea behind First State Financial and Arlington Asset 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.