Correlation Between Tarkio Fund and First American

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

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

Diversification Opportunities for Tarkio Fund and First American

0.88

Correlation Coefficient

Tarkio Fund  First American

Very poor diversification

The 3 months correlation between Tarkio and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tarkio Fund Tarkio and First American Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Investment and Tarkio Fund 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 Tarkio Fund Tarkio are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Investment has no effect on the direction of Tarkio Fund i.e., Tarkio Fund and First American go up and down completely randomly.

Pair Corralation between Tarkio Fund and First American

Assuming the 90 days horizon Tarkio Fund Tarkio is expected to generate 1.21 times more return on investment than First American. However, Tarkio Fund is 1.21 times more volatile than First American Investment. It trades about 0.17 of its potential returns per unit of risk. First American Investment is currently generating about 0.15 per unit of risk. If you would invest  2,748  in Tarkio Fund Tarkio on September 3, 2024 and sell it today you would earn a total of  500.00  from holding Tarkio Fund Tarkio or generate 18.2% return on investment over 90 days.

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

Tarkio Fund Tarkio  vs.  First American Investment

Tarkio Fund Tarkio

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tarkio Fund Tarkio are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Tarkio Fund showed solid returns over the last few months and may actually be approaching a breakup point.

First American Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First American Investment are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, First American showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tarkio Fund and First American

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

The idea behind Tarkio Fund Tarkio and First American Investment 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.