Correlation Between Focus Home and Federal Home

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

By analyzing existing cross correlation between Focus Home Interactive and Federal Home Loan, you can compare the effects of market volatilities on Focus Home and Federal Home 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 Focus Home with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and Federal Home.

Diversification Opportunities for Focus Home and Federal Home

-0.65

Correlation Coefficient

Focus Home  Federal Home

Excellent diversification

The 3 months correlation between Focus and Federal is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Focus Home 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 Focus Home Interactive are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Focus Home i.e., Focus Home and Federal Home go up and down completely randomly.

Pair Corralation between Focus Home and Federal Home

Assuming the 90 days horizon Focus Home Interactive is expected to generate 0.54 times more return on investment than Federal Home. However, Focus Home Interactive is 1.86 times less risky than Federal Home. It trades about 0.13 of its potential returns per unit of risk. Federal Home Loan is currently generating about -0.07 per unit of risk. If you would invest  1,700  in Focus Home Interactive on September 23, 2024 and sell it today you would earn a total of  168.00  from holding Focus Home Interactive or generate 9.88% return on investment over 90 days.

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

Focus Home Interactive  vs.  Federal Home Loan

Focus Home Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Federal Home Loan

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Home and Federal Home

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

The idea behind Focus Home Interactive and Federal Home Loan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.