Correlation Between Titan Company and First National

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

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

Diversification Opportunities for Titan Company and First National

-0.46

Correlation Coefficient

Titan Company  First National

Very good diversification

The 3 months correlation between Titan and First is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited 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 Titan Company 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 Titan Company Limited 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 Titan Company i.e., Titan Company and First National go up and down completely randomly.

Pair Corralation between Titan Company and First National

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the First National. In addition to that, Titan Company is 1.28 times more volatile than First National Financial. It trades about -0.1 of its total potential returns per unit of risk. First National Financial is currently generating about 0.05 per unit of volatility. If you would invest  1,432  in First National Financial on September 4, 2024 and sell it today you would earn a total of  48.00  from holding First National Financial or generate 3.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Titan Company Limited  vs.  First National Financial

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First National Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First National is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Titan Company and First National

The main advantage of trading using opposite Titan Company and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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 Titan Company Limited 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.

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.