Correlation Between Federal Agricultural and United Internet
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and United Internet 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 United Internet 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 United Internet AG, you can compare the effects of market volatilities on Federal Agricultural and United Internet 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 United Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and United Internet.
Diversification Opportunities for Federal Agricultural and United Internet
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Federal and United is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and United Internet go up and down completely randomly.
Pair Corralation between Federal Agricultural and United Internet
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.55 times more return on investment than United Internet. However, Federal Agricultural is 1.55 times more volatile than United Internet AG. It trades about -0.04 of its potential returns per unit of risk. United Internet AG is currently generating about -0.12 per unit of risk. If you would invest 19,464 in Federal Agricultural Mortgage on September 24, 2024 and sell it today you would lose (364.00) from holding Federal Agricultural Mortgage or give up 1.87% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Federal Agricultural Mortgage vs. United Internet AG
Performance |
Timeline |
Federal Agricultural |
United Internet AG |
Federal Agricultural and United Internet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Agricultural and United Internet
The main advantage of trading using opposite Federal Agricultural and United Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, United Internet 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 United Internet will offset losses from the drop in United Internet's long position.Federal Agricultural vs. Choice Hotels International | Federal Agricultural vs. JJ SNACK FOODS | Federal Agricultural vs. COFCO Joycome Foods | Federal Agricultural vs. ASSOC BR FOODS |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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