Correlation Between First International and Peninsula

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

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

Diversification Opportunities for First International and Peninsula

0.97

Correlation Coefficient

First International  Peninsula

Almost no diversification

The 3 months correlation between First and Peninsula is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First International Bank and Peninsula Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Group and First International 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 International Bank are associated (or correlated) with Peninsula. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Group has no effect on the direction of First International i.e., First International and Peninsula go up and down completely randomly.

Pair Corralation between First International and Peninsula

Assuming the 90 days trading horizon First International is expected to generate 1.36 times less return on investment than Peninsula. But when comparing it to its historical volatility, First International Bank is 1.12 times less risky than Peninsula. It trades about 0.34 of its potential returns per unit of risk. Peninsula Group is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  16,392  in Peninsula Group on September 15, 2024 and sell it today you would earn a total of  5,388  from holding Peninsula Group or generate 32.87% return on investment over 90 days.

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

First International Bank  vs.  Peninsula Group

First International Bank

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First International Bank are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First International sustained solid returns over the last few months and may actually be approaching a breakup point.

Peninsula Group

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Peninsula Group are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Peninsula sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First International and Peninsula

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

The idea behind First International Bank and Peninsula Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.