Correlation Between Peninsula and First International

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

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

Diversification Opportunities for Peninsula and First International

0.97

Correlation Coefficient

Peninsula  First International

Almost no diversification

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

Pair Corralation between Peninsula and First International

Assuming the 90 days trading horizon Peninsula Group is expected to generate 1.12 times more return on investment than First International. However, Peninsula is 1.12 times more volatile than First International Bank. It trades about 0.42 of its potential returns per unit of risk. First International Bank is currently generating about 0.34 per unit of risk. If you would invest  16,392  in Peninsula Group on September 16, 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

Peninsula Group  vs.  First International Bank

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.

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.

Pair Trading with Peninsula and First International

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

The idea behind Peninsula Group and First International Bank 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.