Correlation Between Federal Corp and Ability Enterprise

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

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

Diversification Opportunities for Federal Corp and Ability Enterprise

-0.87

Correlation Coefficient

Federal Corp  Ability Enterprise

Pay attention - limited upside

The 3 months correlation between Federal and Ability is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Federal Corp and Ability Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ability Enterprise and Federal Corp 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 Federal Corp are associated (or correlated) with Ability Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ability Enterprise has no effect on the direction of Federal Corp i.e., Federal Corp and Ability Enterprise go up and down completely randomly.

Pair Corralation between Federal Corp and Ability Enterprise

Assuming the 90 days trading horizon Federal Corp is expected to generate 0.42 times more return on investment than Ability Enterprise. However, Federal Corp is 2.39 times less risky than Ability Enterprise. It trades about -0.09 of its potential returns per unit of risk. Ability Enterprise Co is currently generating about -0.11 per unit of risk. If you would invest  1,890  in Federal Corp on October 23, 2024 and sell it today you would lose (60.00) from holding Federal Corp or give up 3.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Federal Corp  vs.  Ability Enterprise Co

Federal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ability Enterprise

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ability Enterprise Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ability Enterprise showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Corp and Ability Enterprise

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

The idea behind Federal Corp and Ability Enterprise Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.