Correlation Between Fannie Mae and TBC Bank

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

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

Diversification Opportunities for Fannie Mae and TBC Bank

-0.58

Correlation Coefficient

Fannie Mae  TBC Bank

Excellent diversification

The 3 months correlation between Fannie and TBC is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fannie Mae and TBC Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TBC Bank Group and Fannie Mae 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 Fannie Mae are associated (or correlated) with TBC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TBC Bank Group has no effect on the direction of Fannie Mae i.e., Fannie Mae and TBC Bank go up and down completely randomly.

Pair Corralation between Fannie Mae and TBC Bank

Assuming the 90 days trading horizon Fannie Mae is expected to generate 3.31 times more return on investment than TBC Bank. However, Fannie Mae is 3.31 times more volatile than TBC Bank Group. It trades about 0.16 of its potential returns per unit of risk. TBC Bank Group is currently generating about 0.02 per unit of risk. If you would invest  161.00  in Fannie Mae on October 25, 2024 and sell it today you would earn a total of  512.00  from holding Fannie Mae or generate 318.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.39%
Values	Daily Returns

Fannie Mae  vs.  TBC Bank Group

Fannie Mae

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

TBC Bank Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TBC Bank Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TBC Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fannie Mae and TBC Bank

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

The idea behind Fannie Mae and TBC Bank Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.