Correlation Between Main Street and FNB

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

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

Diversification Opportunities for Main Street and FNB

0.58

Correlation Coefficient

Main Street  FNB

Very weak diversification

The 3 months correlation between Main and FNB is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc and Main Street 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 Main Street Financial are associated (or correlated) with FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of Main Street i.e., Main Street and FNB go up and down completely randomly.

Pair Corralation between Main Street and FNB

Given the investment horizon of 90 days Main Street Financial is expected to under-perform the FNB. In addition to that, Main Street is 1.09 times more volatile than FNB Inc. It trades about -0.01 of its total potential returns per unit of risk. FNB Inc is currently generating about 0.07 per unit of volatility. If you would invest  2,101  in FNB Inc on September 3, 2024 and sell it today you would earn a total of  399.00  from holding FNB Inc or generate 18.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.74%
Values	Daily Returns

Main Street Financial  vs.  FNB Inc

Main Street Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Main Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FNB Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FNB Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, FNB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Main Street and FNB

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

The idea behind Main Street Financial and FNB Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.