Correlation Between Pembina Pipeline and First National

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

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

Diversification Opportunities for Pembina Pipeline and First National

-0.25

Correlation Coefficient

Pembina Pipeline  First National

Very good diversification

The 3 months correlation between Pembina and First is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and Pembina Pipeline 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 Pembina Pipeline Corp are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and First National go up and down completely randomly.

Pair Corralation between Pembina Pipeline and First National

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to under-perform the First National. But the stock apears to be less risky and, when comparing its historical volatility, Pembina Pipeline Corp is 1.28 times less risky than First National. The stock trades about -0.02 of its potential returns per unit of risk. The First National Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,454  in First National Financial on September 14, 2024 and sell it today you would earn a total of  91.00  from holding First National Financial or generate 6.26% return on investment over 90 days.

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

Pembina Pipeline Corp  vs.  First National Financial

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Pembina Pipeline is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First National Financial

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Pembina Pipeline and First National

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

The idea behind Pembina Pipeline Corp and First National Financial 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.