Correlation Between Timbercreek Financial and First National

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

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

Diversification Opportunities for Timbercreek Financial and First National

0.18

Correlation Coefficient

Timbercreek Financial  First National

Average diversification

The 3 months correlation between Timbercreek and First is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Timbercreek Financial 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 Timbercreek 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 Timbercreek Financial 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 Timbercreek Financial i.e., Timbercreek Financial and First National go up and down completely randomly.

Pair Corralation between Timbercreek Financial and First National

Assuming the 90 days horizon Timbercreek Financial Corp is expected to under-perform the First National. In addition to that, Timbercreek Financial is 1.12 times more volatile than First National Financial. It trades about -0.08 of its total potential returns per unit of risk. First National Financial is currently generating about -0.03 per unit of volatility. If you would invest  3,954  in First National Financial on December 30, 2024 and sell it today you would lose (71.00) from holding First National Financial or give up 1.8% of portfolio value over 90 days.

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

Timbercreek Financial Corp  vs.  First National Financial

Timbercreek Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timbercreek Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Timbercreek Financial 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

Very Weak

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

Pair Trading with Timbercreek Financial and First National

The main advantage of trading using opposite Timbercreek Financial and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timbercreek Financial 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 Timbercreek Financial 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.