Correlation Between Fidelity National and First American

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

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

Diversification Opportunities for Fidelity National and First American

0.92

Correlation Coefficient

Fidelity National  First American

Almost no diversification

The 3 months correlation between Fidelity and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Financial and First American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American and Fidelity National 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 Fidelity National Financial 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 has no effect on the direction of Fidelity National i.e., Fidelity National and First American go up and down completely randomly.

Pair Corralation between Fidelity National and First American

Considering the 90-day investment horizon Fidelity National Financial is expected to generate 0.96 times more return on investment than First American. However, Fidelity National Financial is 1.04 times less risky than First American. It trades about 0.17 of its potential returns per unit of risk. First American is currently generating about 0.07 per unit of risk. If you would invest  5,450  in Fidelity National Financial on August 9, 2024 and sell it today you would earn a total of  639.00  from holding Fidelity National Financial or generate 11.72% return on investment over 90 days.

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

Fidelity National Financial  vs.  First American

Fidelity National

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in December 2024.

First American

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First American are ranked lower than 5 (%) 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.

Pair Trading with Fidelity National and First American

The main advantage of trading using opposite Fidelity National and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National 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 Fidelity National Financial and First American 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .