Correlation Between First Foundation and Locorr Hedged

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

By analyzing existing cross correlation between First Foundation Fixed and Locorr Hedged Core, you can compare the effects of market volatilities on First Foundation and Locorr Hedged 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 Foundation with a short position of Locorr Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Foundation and Locorr Hedged.

Diversification Opportunities for First Foundation and Locorr Hedged

0.82

Correlation Coefficient

First Foundation  Locorr Hedged

Very poor diversification

The 3 months correlation between First and Locorr is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation Fixed and Locorr Hedged Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Hedged Core and First Foundation 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 Foundation Fixed are associated (or correlated) with Locorr Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Hedged Core has no effect on the direction of First Foundation i.e., First Foundation and Locorr Hedged go up and down completely randomly.

Pair Corralation between First Foundation and Locorr Hedged

Assuming the 90 days horizon First Foundation Fixed is expected to generate 0.89 times more return on investment than Locorr Hedged. However, First Foundation Fixed is 1.12 times less risky than Locorr Hedged. It trades about 0.12 of its potential returns per unit of risk. Locorr Hedged Core is currently generating about 0.09 per unit of risk. If you would invest  1,109  in First Foundation Fixed on April 25, 2025 and sell it today you would earn a total of  21.00  from holding First Foundation Fixed or generate 1.89% return on investment over 90 days.

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

First Foundation Fixed  vs.  Locorr Hedged Core

First Foundation Fixed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Foundation Fixed are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Foundation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Locorr Hedged Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Hedged Core are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Locorr Hedged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Foundation and Locorr Hedged

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

The idea behind First Foundation Fixed and Locorr Hedged Core 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.