Correlation Between Federal Agricultural and AgriBank FCB

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

Diversification Opportunities for Federal Agricultural and AgriBank FCB

0.0

Correlation Coefficient

Federal Agricultural  AgriBank FCB

Pay attention - limited upside

The 3 months correlation between Federal and AgriBank is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and AgriBank FCB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgriBank FCB 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 AgriBank FCB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgriBank FCB has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and AgriBank FCB go up and down completely randomly.

Pair Corralation between Federal Agricultural and AgriBank FCB

If you would invest  2,187  in Federal Agricultural Mortgage on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Federal Agricultural Mortgage or generate 3.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  AgriBank FCB

Federal Agricultural

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Federal Agricultural is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AgriBank FCB

Risk-Adjusted Performance

Very Weak

Over the last 90 days AgriBank FCB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AgriBank FCB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Federal Agricultural and AgriBank FCB

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

The idea behind Federal Agricultural Mortgage and AgriBank FCB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.