Correlation Between Gaztransport and Fannie Mae

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

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

Diversification Opportunities for Gaztransport and Fannie Mae

0.69

Correlation Coefficient

Gaztransport  Fannie Mae

Poor diversification

The 3 months correlation between Gaztransport and Fannie is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport et Technigaz and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae and Gaztransport 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 Gaztransport et Technigaz are associated (or correlated) with Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Gaztransport i.e., Gaztransport and Fannie Mae go up and down completely randomly.

Pair Corralation between Gaztransport and Fannie Mae

Assuming the 90 days trading horizon Gaztransport is expected to generate 7.45 times less return on investment than Fannie Mae. But when comparing it to its historical volatility, Gaztransport et Technigaz is 3.53 times less risky than Fannie Mae. It trades about 0.11 of its potential returns per unit of risk. Fannie Mae is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  230.00  in Fannie Mae on December 4, 2024 and sell it today you would earn a total of  424.00  from holding Fannie Mae or generate 184.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.8%
Values	Daily Returns

Gaztransport et Technigaz  vs.  Fannie Mae

Gaztransport et Technigaz

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gaztransport unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fannie Mae

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaztransport and Fannie Mae

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

The idea behind Gaztransport et Technigaz and Fannie Mae 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.