Correlation Between First Of and American National

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

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

Diversification Opportunities for First Of and American National

0.54

Correlation Coefficient

First Of  American National

Very weak diversification

The 3 months correlation between First and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding First of Long and American National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American National and First Of 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 of Long are associated (or correlated) with American National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American National has no effect on the direction of First Of i.e., First Of and American National go up and down completely randomly.

Pair Corralation between First Of and American National

Given the investment horizon of 90 days First of Long is expected to generate 1.05 times more return on investment than American National. However, First Of is 1.05 times more volatile than American National Bankshares. It trades about 0.0 of its potential returns per unit of risk. American National Bankshares is currently generating about -0.04 per unit of risk. If you would invest  1,658  in First of Long on September 3, 2024 and sell it today you would lose (224.00) from holding First of Long or give up 13.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.0%
Values	Daily Returns

First of Long  vs.  American National Bankshares

First of Long

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First of Long are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, First Of exhibited solid returns over the last few months and may actually be approaching a breakup point.

American National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, American National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Of and American National

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

The idea behind First of Long and American National Bankshares 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.