Correlation Between FIRST NATIONAL and LOANDEPOT INC

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

By analyzing existing cross correlation between FIRST NATIONAL FIN and LOANDEPOT INC A, you can compare the effects of market volatilities on FIRST NATIONAL and LOANDEPOT INC 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 NATIONAL with a short position of LOANDEPOT INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST NATIONAL and LOANDEPOT INC.

Diversification Opportunities for FIRST NATIONAL and LOANDEPOT INC

0.12

Correlation Coefficient

FIRST NATIONAL  LOANDEPOT INC

Average diversification

The 3 months correlation between FIRST and LOANDEPOT is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding FIRST NATIONAL FIN and LOANDEPOT INC A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOANDEPOT INC A and FIRST NATIONAL 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 NATIONAL FIN are associated (or correlated) with LOANDEPOT INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOANDEPOT INC A has no effect on the direction of FIRST NATIONAL i.e., FIRST NATIONAL and LOANDEPOT INC go up and down completely randomly.

Pair Corralation between FIRST NATIONAL and LOANDEPOT INC

Assuming the 90 days horizon FIRST NATIONAL is expected to generate 2.88 times less return on investment than LOANDEPOT INC. But when comparing it to its historical volatility, FIRST NATIONAL FIN is 2.34 times less risky than LOANDEPOT INC. It trades about 0.05 of its potential returns per unit of risk. LOANDEPOT INC A is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  140.00  in LOANDEPOT INC A on September 24, 2024 and sell it today you would earn a total of  45.00  from holding LOANDEPOT INC A or generate 32.14% return on investment over 90 days.

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

FIRST NATIONAL FIN  vs.  LOANDEPOT INC A

FIRST NATIONAL FIN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST NATIONAL FIN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIRST NATIONAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LOANDEPOT INC A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOANDEPOT INC A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with FIRST NATIONAL and LOANDEPOT INC

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

The idea behind FIRST NATIONAL FIN and LOANDEPOT INC A 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.