Correlation Between Federal Agricultural and Healthpeak Properties

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

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

Diversification Opportunities for Federal Agricultural and Healthpeak Properties

0.27

Correlation Coefficient

Federal Agricultural  Healthpeak Properties

Modest diversification

The 3 months correlation between Federal and Healthpeak is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Healthpeak Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthpeak Properties and Federal Agricultural 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 Agricultural Mortgage are associated (or correlated) with Healthpeak Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthpeak Properties has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Healthpeak Properties go up and down completely randomly.

Pair Corralation between Federal Agricultural and Healthpeak Properties

Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.74 times more return on investment than Healthpeak Properties. However, Federal Agricultural is 1.74 times more volatile than Healthpeak Properties. It trades about -0.14 of its potential returns per unit of risk. Healthpeak Properties is currently generating about -0.43 per unit of risk. If you would invest  19,861  in Federal Agricultural Mortgage on September 29, 2024 and sell it today you would lose (961.00) from holding Federal Agricultural Mortgage or give up 4.84% of portfolio value over 90 days.

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

Federal Agricultural Mortgage  vs.  Healthpeak Properties

Federal Agricultural

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Federal Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

Healthpeak Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthpeak Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Healthpeak Properties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Federal Agricultural and Healthpeak Properties

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

The idea behind Federal Agricultural Mortgage and Healthpeak Properties 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.