Correlation Between First American and Best Buy

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Can any of the company-specific risk be diversified away by investing in both First American and Best Buy 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 American and Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and Best Buy Co, you can compare the effects of market volatilities on First American and Best Buy 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 American with a short position of Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Best Buy.

Diversification Opportunities for First American and Best Buy

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between First and Best is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and First American 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 American Funds are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of First American i.e., First American and Best Buy go up and down completely randomly.

Pair Corralation between First American and Best Buy

Assuming the 90 days horizon First American Funds is expected to generate 8.21 times more return on investment than Best Buy. However, First American is 8.21 times more volatile than Best Buy Co. It trades about 0.04 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.01 per unit of risk. If you would invest  100.00  in First American Funds on December 30, 2023 and sell it today you would earn a total of  0.00  from holding First American Funds or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First American Funds  vs.  Best Buy Co

 Performance 
       Timeline  
First American Funds 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days First American Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Best Buy 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in April 2024.

First American and Best Buy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First American and Best Buy

The main advantage of trading using opposite First American and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
The idea behind First American Funds and Best Buy Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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