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 3.3 times less return on investment than FirstGroup Plc. But when comparing it to its historical volatility, TFS FINANCIAL is 1.19 times less risky than FirstGroup Plc. It trades about 0.02 of its potential returns per unit of risk. FirstGroup plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 116.00 in FirstGroup plc on September 8, 2024 and sell it today you would earn a total of 68.00 from holding FirstGroup plc or generate 58.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
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. CAL MAINE FOODS | TFS FINANCIAL vs. Cal Maine Foods | TFS FINANCIAL vs. PSI Software AG | TFS FINANCIAL vs. COFCO Joycome Foods |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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