Correlation Between Federal Agricultural and Runway Growth

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

Diversification Opportunities for Federal Agricultural and Runway Growth

-0.61

Correlation Coefficient

Federal Agricultural  Runway Growth

Excellent diversification

The 3 months correlation between Federal and Runway is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Runway Growth Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Runway Growth Finance 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 Runway Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Runway Growth Finance has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Runway Growth go up and down completely randomly.

Pair Corralation between Federal Agricultural and Runway Growth

Assuming the 90 days trading horizon Federal Agricultural Mortgage is expected to under-perform the Runway Growth. But the preferred stock apears to be less risky and, when comparing its historical volatility, Federal Agricultural Mortgage is 1.88 times less risky than Runway Growth. The preferred stock trades about -0.31 of its potential returns per unit of risk. The Runway Growth Finance is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,024  in Runway Growth Finance on September 20, 2024 and sell it today you would earn a total of  1.00  from holding Runway Growth Finance or generate 0.1% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  Runway Growth Finance

Federal Agricultural

Risk-Adjusted Performance

0 of 100

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 fragile performance, the Preferred Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Runway Growth Finance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Runway Growth Finance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Runway Growth 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 Runway Growth

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

The idea behind Federal Agricultural Mortgage and Runway Growth Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.