Correlation Between Federal Agricultural and ÜSTRA Hannoversche

Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and ÜSTRA Hannoversche 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 ÜSTRA Hannoversche 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 STRA Hannoversche Verkehrsbetriebe, you can compare the effects of market volatilities on Federal Agricultural and ÜSTRA Hannoversche 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 ÜSTRA Hannoversche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and ÜSTRA Hannoversche.

Diversification Opportunities for Federal Agricultural and ÜSTRA Hannoversche

-0.09

Correlation Coefficient

Federal Agricultural  ÜSTRA Hannoversche

Good diversification

The 3 months correlation between Federal and ÜSTRA is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and STRA Hannoversche Verkehrsbetr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ÜSTRA Hannoversche 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 ÜSTRA Hannoversche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ÜSTRA Hannoversche has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and ÜSTRA Hannoversche go up and down completely randomly.

Pair Corralation between Federal Agricultural and ÜSTRA Hannoversche

Assuming the 90 days horizon Federal Agricultural Mortgage is expected to under-perform the ÜSTRA Hannoversche. But the stock apears to be less risky and, when comparing its historical volatility, Federal Agricultural Mortgage is 1.23 times less risky than ÜSTRA Hannoversche. The stock trades about -0.07 of its potential returns per unit of risk. The STRA Hannoversche Verkehrsbetriebe is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  970.00  in STRA Hannoversche Verkehrsbetriebe on December 20, 2024 and sell it today you would earn a total of  0.00  from holding STRA Hannoversche Verkehrsbetriebe or generate 0.0% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  STRA Hannoversche Verkehrsbetr

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 uncertain 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.

ÜSTRA Hannoversche

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Federal Agricultural and ÜSTRA Hannoversche

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

The idea behind Federal Agricultural Mortgage and STRA Hannoversche Verkehrsbetriebe 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.