Correlation Between Foreign Trade and Bank First

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

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

Diversification Opportunities for Foreign Trade and Bank First

-0.55

Correlation Coefficient

Foreign Trade  Bank First

Excellent diversification

The 3 months correlation between Foreign and Bank is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Foreign Trade Bank and Bank First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank First National and Foreign Trade 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 Foreign Trade Bank are associated (or correlated) with Bank First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank First National has no effect on the direction of Foreign Trade i.e., Foreign Trade and Bank First go up and down completely randomly.

Pair Corralation between Foreign Trade and Bank First

Considering the 90-day investment horizon Foreign Trade Bank is expected to generate 0.45 times more return on investment than Bank First. However, Foreign Trade Bank is 2.23 times less risky than Bank First. It trades about -0.08 of its potential returns per unit of risk. Bank First National is currently generating about -0.09 per unit of risk. If you would invest  2,988  in Foreign Trade Bank on January 25, 2024 and sell it today you would lose (56.00) from holding Foreign Trade Bank or give up 1.87% of portfolio value over 90 days.

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

Foreign Trade Bank  vs.  Bank First National

Foreign Trade Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Foreign Trade showed solid returns over the last few months and may actually be approaching a breakup point.

Bank First National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Foreign Trade and Bank First

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

The idea behind Foreign Trade Bank and Bank First National 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.