Correlation Between Federal Agricultural and Mill City

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

Diversification Opportunities for Federal Agricultural and Mill City

-0.29

Correlation Coefficient

Federal Agricultural  Mill City

Very good diversification

The 3 months correlation between Federal and Mill is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Mill City Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mill City Ventures 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 Mill City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mill City Ventures has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Mill City go up and down completely randomly.

Pair Corralation between Federal Agricultural and Mill City

Assuming the 90 days horizon Federal Agricultural Mortgage is expected to under-perform the Mill City. But the stock apears to be less risky and, when comparing its historical volatility, Federal Agricultural Mortgage is 2.78 times less risky than Mill City. The stock trades about -0.14 of its potential returns per unit of risk. The Mill City Ventures is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Mill City Ventures on October 11, 2024 and sell it today you would earn a total of  83.00  from holding Mill City Ventures or generate 41.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.73%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  Mill City Ventures

Federal Agricultural

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Federal Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mill City Ventures

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mill City Ventures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mill City unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Agricultural and Mill City

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

The idea behind Federal Agricultural Mortgage and Mill City Ventures 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.