Correlation Between Corporate Office and FIRST NATIONAL

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

By analyzing existing cross correlation between Corporate Office Properties and FIRST NATIONAL FIN, you can compare the effects of market volatilities on Corporate Office 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 Corporate Office with a short position of FIRST NATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and FIRST NATIONAL.

Diversification Opportunities for Corporate Office and FIRST NATIONAL

0.11

Correlation Coefficient

Corporate Office  FIRST NATIONAL

Average diversification

The 3 months correlation between Corporate and FIRST is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and FIRST NATIONAL FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST NATIONAL FIN and Corporate Office 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 Corporate Office Properties 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 FIN has no effect on the direction of Corporate Office i.e., Corporate Office and FIRST NATIONAL go up and down completely randomly.

Pair Corralation between Corporate Office and FIRST NATIONAL

Assuming the 90 days horizon Corporate Office Properties is expected to under-perform the FIRST NATIONAL. In addition to that, Corporate Office is 1.05 times more volatile than FIRST NATIONAL FIN. It trades about -0.2 of its total potential returns per unit of risk. FIRST NATIONAL FIN is currently generating about 0.01 per unit of volatility. If you would invest  2,580  in FIRST NATIONAL FIN on December 22, 2024 and sell it today you would earn a total of  0.00  from holding FIRST NATIONAL FIN or generate 0.0% return on investment over 90 days.

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

Corporate Office Properties  vs.  FIRST NATIONAL FIN

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

FIRST NATIONAL FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days FIRST NATIONAL FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FIRST NATIONAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Corporate Office and FIRST NATIONAL

The main advantage of trading using opposite Corporate Office and FIRST NATIONAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Office 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 Corporate Office Properties and FIRST NATIONAL FIN 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.