Correlation Between ZB FINANCIAL and FIRST MUTUAL

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

By analyzing existing cross correlation between ZB FINANCIAL HOLDINGS and FIRST MUTUAL PROPERTIES, you can compare the effects of market volatilities on ZB FINANCIAL and FIRST MUTUAL 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 ZB FINANCIAL with a short position of FIRST MUTUAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZB FINANCIAL and FIRST MUTUAL.

Diversification Opportunities for ZB FINANCIAL and FIRST MUTUAL

-0.87

Correlation Coefficient

ZB FINANCIAL  FIRST MUTUAL

Pay attention - limited upside

The 3 months correlation between ZBFH and FIRST is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding ZB FINANCIAL HOLDINGS and FIRST MUTUAL PROPERTIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST MUTUAL PROPERTIES and ZB 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 ZB FINANCIAL HOLDINGS are associated (or correlated) with FIRST MUTUAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST MUTUAL PROPERTIES has no effect on the direction of ZB FINANCIAL i.e., ZB FINANCIAL and FIRST MUTUAL go up and down completely randomly.

Pair Corralation between ZB FINANCIAL and FIRST MUTUAL

Assuming the 90 days trading horizon ZB FINANCIAL is expected to generate 1.91 times less return on investment than FIRST MUTUAL. In addition to that, ZB FINANCIAL is 1.11 times more volatile than FIRST MUTUAL PROPERTIES. It trades about 0.09 of its total potential returns per unit of risk. FIRST MUTUAL PROPERTIES is currently generating about 0.19 per unit of volatility. If you would invest  2,605  in FIRST MUTUAL PROPERTIES on October 12, 2024 and sell it today you would earn a total of  9,690  from holding FIRST MUTUAL PROPERTIES or generate 371.98% return on investment over 90 days.

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

ZB FINANCIAL HOLDINGS  vs.  FIRST MUTUAL PROPERTIES

ZB FINANCIAL HOLDINGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZB FINANCIAL HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FIRST MUTUAL PROPERTIES

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST MUTUAL PROPERTIES are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent forward indicators, FIRST MUTUAL demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZB FINANCIAL and FIRST MUTUAL

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

The idea behind ZB FINANCIAL HOLDINGS and FIRST MUTUAL PROPERTIES 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.