Correlation Between TFS FINANCIAL and FirstGroup Plc
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL and FirstGroup Plc 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 TFS FINANCIAL and FirstGroup Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and FirstGroup plc, you can compare the effects of market volatilities on TFS FINANCIAL and FirstGroup Plc 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 TFS FINANCIAL with a short position of FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and FirstGroup Plc.
Diversification Opportunities for TFS FINANCIAL and FirstGroup Plc
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between TFS and FirstGroup is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc and TFS FINANCIAL 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 TFS FINANCIAL are associated (or correlated) with FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and FirstGroup Plc go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and FirstGroup Plc
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.34 times less return on investment than FirstGroup Plc. In addition to that, TFS FINANCIAL is 1.3 times more volatile than FirstGroup plc. It trades about 0.22 of its total potential returns per unit of risk. FirstGroup plc is currently generating about 0.39 per unit of volatility. If you would invest 158.00 in FirstGroup plc on September 6, 2024 and sell it today you would earn a total of 27.00 from holding FirstGroup plc or generate 17.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
TFS FINANCIAL vs. FirstGroup plc
Performance |
Timeline |
TFS FINANCIAL |
FirstGroup plc |
TFS FINANCIAL and FirstGroup Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TFS FINANCIAL and FirstGroup Plc
The main advantage of trading using opposite TFS FINANCIAL and FirstGroup Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL position performs unexpectedly, FirstGroup Plc 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 FirstGroup Plc will offset losses from the drop in FirstGroup Plc's long position.TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc | TFS FINANCIAL vs. Apple Inc |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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