Correlation Between RiverNorth Specialty and First Internet

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

By analyzing existing cross correlation between RiverNorth Specialty Finance and First Internet Bancorp, you can compare the effects of market volatilities on RiverNorth Specialty and First Internet 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 RiverNorth Specialty with a short position of First Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of RiverNorth Specialty and First Internet.

Diversification Opportunities for RiverNorth Specialty and First Internet

0.71

Correlation Coefficient

RiverNorth Specialty  First Internet

Poor diversification

The 3 months correlation between RiverNorth and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty Finance and First Internet Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Internet Bancorp and RiverNorth Specialty 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 RiverNorth Specialty Finance are associated (or correlated) with First Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Internet Bancorp has no effect on the direction of RiverNorth Specialty i.e., RiverNorth Specialty and First Internet go up and down completely randomly.

Pair Corralation between RiverNorth Specialty and First Internet

Considering the 90-day investment horizon RiverNorth Specialty Finance is expected to generate 1.43 times more return on investment than First Internet. However, RiverNorth Specialty is 1.43 times more volatile than First Internet Bancorp. It trades about 0.09 of its potential returns per unit of risk. First Internet Bancorp is currently generating about 0.03 per unit of risk. If you would invest  1,478  in RiverNorth Specialty Finance on December 28, 2024 and sell it today you would earn a total of  41.00  from holding RiverNorth Specialty Finance or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RiverNorth Specialty Finance  vs.  First Internet Bancorp

RiverNorth Specialty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

First Internet Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Internet Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking signals, First Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RiverNorth Specialty and First Internet

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

The idea behind RiverNorth Specialty Finance and First Internet Bancorp 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.