Correlation Between Yem Chio and Federal Corp

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

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

Diversification Opportunities for Yem Chio and Federal Corp

0.89

Correlation Coefficient

Yem Chio  Federal Corp

Very poor diversification

The 3 months correlation between Yem and Federal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Yem Chio Co and Federal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Corp and Yem Chio 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 Yem Chio Co are associated (or correlated) with Federal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Corp has no effect on the direction of Yem Chio i.e., Yem Chio and Federal Corp go up and down completely randomly.

Pair Corralation between Yem Chio and Federal Corp

Assuming the 90 days trading horizon Yem Chio Co is expected to under-perform the Federal Corp. But the stock apears to be less risky and, when comparing its historical volatility, Yem Chio Co is 1.11 times less risky than Federal Corp. The stock trades about -0.21 of its potential returns per unit of risk. The Federal Corp is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,165  in Federal Corp on October 3, 2024 and sell it today you would lose (270.00) from holding Federal Corp or give up 12.47% of portfolio value over 90 days.

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

Yem Chio Co  vs.  Federal Corp

Yem Chio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yem Chio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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.

Pair Trading with Yem Chio and Federal Corp

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

The idea behind Yem Chio Co and Federal Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.