Correlation Between FIRST NATIONAL and LendingTree

Can any of the company-specific risk be diversified away by investing in both FIRST NATIONAL and LendingTree 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 LendingTree 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 LendingTree, you can compare the effects of market volatilities on FIRST NATIONAL and LendingTree 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 LendingTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST NATIONAL and LendingTree.

Diversification Opportunities for FIRST NATIONAL and LendingTree

-0.64

Correlation Coefficient

FIRST NATIONAL  LendingTree

Excellent diversification

The 3 months correlation between FIRST and LendingTree is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding FIRST NATIONAL FIN and LendingTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingTree 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 LendingTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingTree has no effect on the direction of FIRST NATIONAL i.e., FIRST NATIONAL and LendingTree go up and down completely randomly.

Pair Corralation between FIRST NATIONAL and LendingTree

Assuming the 90 days horizon FIRST NATIONAL FIN is expected to under-perform the LendingTree. But the stock apears to be less risky and, when comparing its historical volatility, FIRST NATIONAL FIN is 1.65 times less risky than LendingTree. The stock trades about -0.25 of its potential returns per unit of risk. The LendingTree is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  4,173  in LendingTree on September 26, 2024 and sell it today you would lose (393.00) from holding LendingTree or give up 9.42% of portfolio value over 90 days.

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

FIRST NATIONAL FIN  vs.  LendingTree

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 unsteady basic indicators, FIRST NATIONAL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LendingTree

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LendingTree 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 LendingTree

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

The idea behind FIRST NATIONAL FIN and LendingTree 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.