Correlation Between First American and Trisura

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

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

Diversification Opportunities for First American and Trisura

-0.4

Correlation Coefficient

First American  Trisura

Very good diversification

The 3 months correlation between First and Trisura is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First American Financial and Trisura Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trisura Group and First American 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 American Financial are associated (or correlated) with Trisura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trisura Group has no effect on the direction of First American i.e., First American and Trisura go up and down completely randomly.

Pair Corralation between First American and Trisura

Assuming the 90 days horizon First American Financial is expected to under-perform the Trisura. But the stock apears to be less risky and, when comparing its historical volatility, First American Financial is 1.12 times less risky than Trisura. The stock trades about -0.18 of its potential returns per unit of risk. The Trisura Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,640  in Trisura Group on September 22, 2024 and sell it today you would lose (80.00) from holding Trisura Group or give up 3.03% of portfolio value over 90 days.

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

First American Financial  vs.  Trisura Group

First American Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First American Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Trisura Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trisura Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with First American and Trisura

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

The idea behind First American Financial and Trisura 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.