Correlation Between LendingTree and FIRST NATIONAL

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

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

Diversification Opportunities for LendingTree and FIRST NATIONAL

-0.64

Correlation Coefficient

LendingTree  FIRST NATIONAL

Excellent diversification

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

Pair Corralation between LendingTree and FIRST NATIONAL

Assuming the 90 days horizon LendingTree is expected to under-perform the FIRST NATIONAL. In addition to that, LendingTree is 2.06 times more volatile than FIRST NATIONAL FIN. It trades about -0.09 of its total potential returns per unit of risk. FIRST NATIONAL FIN is currently generating about 0.05 per unit of volatility. If you would invest  2,483  in FIRST NATIONAL FIN on September 25, 2024 and sell it today you would earn a total of  137.00  from holding FIRST NATIONAL FIN or generate 5.52% return on investment over 90 days.

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

LendingTree  vs.  FIRST NATIONAL FIN

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 uncertain 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.

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.

Pair Trading with LendingTree and FIRST NATIONAL

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

The idea behind LendingTree and FIRST NATIONAL FIN 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.