Correlation Between TC Energy and First National

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

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

Diversification Opportunities for TC Energy and First National

-0.38

Correlation Coefficient

TC Energy  First National

Very good diversification

The 3 months correlation between TRP and First is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding TC Energy 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 TC Energy 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 TC Energy 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 TC Energy i.e., TC Energy and First National go up and down completely randomly.

Pair Corralation between TC Energy and First National

Assuming the 90 days trading horizon TC Energy Corp is expected to generate 1.27 times more return on investment than First National. However, TC Energy is 1.27 times more volatile than First National Financial. It trades about 0.06 of its potential returns per unit of risk. First National Financial is currently generating about -0.02 per unit of risk. If you would invest  6,621  in TC Energy Corp on December 28, 2024 and sell it today you would earn a total of  290.00  from holding TC Energy Corp or generate 4.38% return on investment over 90 days.

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

TC Energy Corp  vs.  First National Financial

TC Energy Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TC Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TC Energy 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 TC Energy and First National

The main advantage of trading using opposite TC Energy and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC Energy 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 TC Energy 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.