Correlation Between Sovereign Metals and FIRST SAVINGS

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

By analyzing existing cross correlation between Sovereign Metals Limited and FIRST SAVINGS FINL, you can compare the effects of market volatilities on Sovereign Metals and FIRST SAVINGS 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 Sovereign Metals with a short position of FIRST SAVINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and FIRST SAVINGS.

Diversification Opportunities for Sovereign Metals and FIRST SAVINGS

0.84

Correlation Coefficient

Sovereign Metals  FIRST SAVINGS

Very poor diversification

The 3 months correlation between Sovereign and FIRST is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals Limited and FIRST SAVINGS FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SAVINGS FINL and Sovereign Metals 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 Sovereign Metals Limited are associated (or correlated) with FIRST SAVINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SAVINGS FINL has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and FIRST SAVINGS go up and down completely randomly.

Pair Corralation between Sovereign Metals and FIRST SAVINGS

Assuming the 90 days horizon Sovereign Metals is expected to generate 1.07 times less return on investment than FIRST SAVINGS. In addition to that, Sovereign Metals is 1.07 times more volatile than FIRST SAVINGS FINL. It trades about 0.07 of its total potential returns per unit of risk. FIRST SAVINGS FINL is currently generating about 0.08 per unit of volatility. If you would invest  2,048  in FIRST SAVINGS FINL on October 22, 2024 and sell it today you would earn a total of  232.00  from holding FIRST SAVINGS FINL or generate 11.33% return on investment over 90 days.

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

Sovereign Metals Limited  vs.  FIRST SAVINGS FINL

Sovereign Metals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sovereign Metals reported solid returns over the last few months and may actually be approaching a breakup point.

FIRST SAVINGS FINL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SAVINGS FINL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FIRST SAVINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sovereign Metals and FIRST SAVINGS

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

The idea behind Sovereign Metals Limited and FIRST SAVINGS FINL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.