Correlation Between FNB ETN and Firstrand

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

By analyzing existing cross correlation between FNB ETN JPMORGQ and Firstrand, you can compare the effects of market volatilities on FNB ETN and Firstrand 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 FNB ETN with a short position of Firstrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of FNB ETN and Firstrand.

Diversification Opportunities for FNB ETN and Firstrand

-0.34

Correlation Coefficient

FNB ETN  Firstrand

Very good diversification

The 3 months correlation between FNB and Firstrand is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding FNB ETN JPMORGQ and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand and FNB ETN 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 FNB ETN JPMORGQ are associated (or correlated) with Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of FNB ETN i.e., FNB ETN and Firstrand go up and down completely randomly.

Pair Corralation between FNB ETN and Firstrand

Assuming the 90 days trading horizon FNB ETN JPMORGQ is expected to generate 1.11 times more return on investment than Firstrand. However, FNB ETN is 1.11 times more volatile than Firstrand. It trades about 0.13 of its potential returns per unit of risk. Firstrand is currently generating about 0.06 per unit of risk. If you would invest  134,200  in FNB ETN JPMORGQ on September 14, 2024 and sell it today you would earn a total of  123,100  from holding FNB ETN JPMORGQ or generate 91.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.77%
Values	Daily Returns

FNB ETN JPMORGQ  vs.  Firstrand

FNB ETN JPMORGQ

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FNB ETN JPMORGQ are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNB ETN sustained solid returns over the last few months and may actually be approaching a breakup point.

Firstrand

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FNB ETN and Firstrand

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

The idea behind FNB ETN JPMORGQ and Firstrand 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.