Correlation Between EQB and First National

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

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

Diversification Opportunities for EQB and First National

0.65

Correlation Coefficient

EQB  First National

Poor diversification

The 3 months correlation between EQB and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding EQB Inc and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial and EQB 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 EQB Inc 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 Financial has no effect on the direction of EQB i.e., EQB and First National go up and down completely randomly.

Pair Corralation between EQB and First National

Assuming the 90 days trading horizon EQB Inc is expected to generate 1.5 times more return on investment than First National. However, EQB is 1.5 times more volatile than First National Financial. It trades about 0.13 of its potential returns per unit of risk. First National Financial is currently generating about 0.16 per unit of risk. If you would invest  8,956  in EQB Inc on April 20, 2025 and sell it today you would earn a total of  1,251  from holding EQB Inc or generate 13.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

EQB Inc  vs.  First National Financial

EQB Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EQB Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, EQB displayed solid returns over the last few months and may actually be approaching a breakup point.

First National Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with EQB and First National

The main advantage of trading using opposite EQB and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQB 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 EQB Inc and First National Financial 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.