Correlation Between First Financial and CreditRiskMonitor

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

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

Diversification Opportunities for First Financial and CreditRiskMonitor

0.82

Correlation Coefficient

First Financial  CreditRiskMonitor

Very poor diversification

The 3 months correlation between First and CreditRiskMonitor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and CreditRiskMonitorCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CreditRiskMonitorCom and First 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 First Financial are associated (or correlated) with CreditRiskMonitor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CreditRiskMonitorCom has no effect on the direction of First Financial i.e., First Financial and CreditRiskMonitor go up and down completely randomly.

Pair Corralation between First Financial and CreditRiskMonitor

Given the investment horizon of 90 days First Financial is expected to generate 2.65 times less return on investment than CreditRiskMonitor. But when comparing it to its historical volatility, First Financial is 1.49 times less risky than CreditRiskMonitor. It trades about 0.09 of its potential returns per unit of risk. CreditRiskMonitorCom is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  222.00  in CreditRiskMonitorCom on October 3, 2024 and sell it today you would earn a total of  81.00  from holding CreditRiskMonitorCom or generate 36.49% return on investment over 90 days.

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

First Financial  vs.  CreditRiskMonitorCom

First Financial

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Financial reported solid returns over the last few months and may actually be approaching a breakup point.

CreditRiskMonitorCom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CreditRiskMonitorCom are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, CreditRiskMonitor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and CreditRiskMonitor

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

The idea behind First Financial and CreditRiskMonitorCom 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.