Correlation Between Federal Agricultural and Enova International

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

Diversification Opportunities for Federal Agricultural and Enova International

-0.17

Correlation Coefficient

Federal Agricultural  Enova International

Good diversification

The 3 months correlation between Federal and Enova is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Enova International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enova International 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 Enova International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enova International has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Enova International go up and down completely randomly.

Pair Corralation between Federal Agricultural and Enova International

Assuming the 90 days horizon Federal Agricultural is expected to generate 8.18 times less return on investment than Enova International. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.06 times less risky than Enova International. It trades about 0.0 of its potential returns per unit of risk. Enova International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,694  in Enova International on December 29, 2024 and sell it today you would earn a total of  234.00  from holding Enova International or generate 2.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.89%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  Enova International

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 somewhat strong basic indicators, Federal Agricultural is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Enova International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enova International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enova International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federal Agricultural and Enova International

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

The idea behind Federal Agricultural Mortgage and Enova International 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 CEOs Directory module to screen CEOs from public companies around the world.