Correlation Between Broadridge Financial and Federal Agricultural

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

By analyzing existing cross correlation between Broadridge Financial Solutions and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Broadridge Financial and Federal Agricultural 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 Broadridge Financial with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadridge Financial and Federal Agricultural.

Diversification Opportunities for Broadridge Financial and Federal Agricultural

0.81

Correlation Coefficient

Broadridge Financial  Federal Agricultural

Very poor diversification

The 3 months correlation between Broadridge and Federal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Broadridge Financial 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 Broadridge Financial Solutions are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Broadridge Financial i.e., Broadridge Financial and Federal Agricultural go up and down completely randomly.

Pair Corralation between Broadridge Financial and Federal Agricultural

Assuming the 90 days horizon Broadridge Financial Solutions is expected to generate 0.61 times more return on investment than Federal Agricultural. However, Broadridge Financial Solutions is 1.64 times less risky than Federal Agricultural. It trades about 0.11 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of risk. If you would invest  20,120  in Broadridge Financial Solutions on October 20, 2024 and sell it today you would earn a total of  1,880  from holding Broadridge Financial Solutions or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Broadridge Financial Solutions  vs.  Federal Agricultural Mortgage

Broadridge Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Federal Agricultural

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Broadridge Financial and Federal Agricultural

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

The idea behind Broadridge Financial Solutions and Federal Agricultural Mortgage 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.