Correlation Between First Business and Hasbro

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

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

Diversification Opportunities for First Business and Hasbro

-0.19

Correlation Coefficient

First Business  Hasbro

Good diversification

The 3 months correlation between First and Hasbro is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Hasbro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hasbro Inc and First Business 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 Business Financial are associated (or correlated) with Hasbro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hasbro Inc has no effect on the direction of First Business i.e., First Business and Hasbro go up and down completely randomly.

Pair Corralation between First Business and Hasbro

Given the investment horizon of 90 days First Business is expected to generate 309.59 times less return on investment than Hasbro. But when comparing it to its historical volatility, First Business Financial is 1.67 times less risky than Hasbro. It trades about 0.0 of its potential returns per unit of risk. Hasbro Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,524  in Hasbro Inc on February 4, 2024 and sell it today you would earn a total of  624.00  from holding Hasbro Inc or generate 11.3% return on investment over 90 days.

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

First Business Financial  vs.  Hasbro Inc

First Business Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Business Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, First Business is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hasbro Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hasbro Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Hasbro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Business and Hasbro

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

The idea behind First Business Financial and Hasbro Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.