Correlation Between KOOL2PLAY and Federal Agricultural

Can any of the company-specific risk be diversified away by investing in both KOOL2PLAY 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 KOOL2PLAY and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KOOL2PLAY SA ZY and Federal Agricultural Mortgage, you can compare the effects of market volatilities on KOOL2PLAY 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 KOOL2PLAY with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOOL2PLAY and Federal Agricultural.

Diversification Opportunities for KOOL2PLAY and Federal Agricultural

-0.18

Correlation Coefficient

KOOL2PLAY  Federal Agricultural

Good diversification

The 3 months correlation between KOOL2PLAY and Federal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding KOOL2PLAY SA ZY and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and KOOL2PLAY 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 KOOL2PLAY SA ZY 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 KOOL2PLAY i.e., KOOL2PLAY and Federal Agricultural go up and down completely randomly.

Pair Corralation between KOOL2PLAY and Federal Agricultural

Assuming the 90 days horizon KOOL2PLAY SA ZY is expected to generate 4.27 times more return on investment than Federal Agricultural. However, KOOL2PLAY is 4.27 times more volatile than Federal Agricultural Mortgage. It trades about 0.11 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.06 per unit of risk. If you would invest  15.00  in KOOL2PLAY SA ZY on December 23, 2024 and sell it today you would earn a total of  6.00  from holding KOOL2PLAY SA ZY or generate 40.0% return on investment over 90 days.

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

KOOL2PLAY SA ZY  vs.  Federal Agricultural Mortgage

KOOL2PLAY SA ZY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KOOL2PLAY SA ZY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KOOL2PLAY reported solid returns over the last few months and may actually be approaching a breakup point.

Federal Agricultural

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KOOL2PLAY and Federal Agricultural

The main advantage of trading using opposite KOOL2PLAY and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOOL2PLAY 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 KOOL2PLAY SA ZY 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.