Correlation Between First Financial and Micro Star

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

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

Diversification Opportunities for First Financial and Micro Star

-0.35

Correlation Coefficient

First Financial  Micro Star

Very good diversification

The 3 months correlation between First and Micro is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Holding and Micro Star International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Star Internati and First 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 First Financial Holding are associated (or correlated) with Micro Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Star Internati has no effect on the direction of First Financial i.e., First Financial and Micro Star go up and down completely randomly.

Pair Corralation between First Financial and Micro Star

Assuming the 90 days trading horizon First Financial Holding is expected to under-perform the Micro Star. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Holding is 1.68 times less risky than Micro Star. The stock trades about 0.0 of its potential returns per unit of risk. The Micro Star International Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  18,150  in Micro Star International Co on September 27, 2024 and sell it today you would earn a total of  300.00  from holding Micro Star International Co or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

First Financial Holding  vs.  Micro Star International Co

First Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Micro Star Internati

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Star International Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Micro Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Financial and Micro Star

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

The idea behind First Financial Holding and Micro Star International 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.