Correlation Between Federal Agricultural and Cion Investment

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

Diversification Opportunities for Federal Agricultural and Cion Investment

0.56

Correlation Coefficient

Federal Agricultural  Cion Investment

Very weak diversification

The 3 months correlation between Federal and Cion is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Cion Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cion Investment Corp 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 Cion Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cion Investment Corp has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Cion Investment go up and down completely randomly.

Pair Corralation between Federal Agricultural and Cion Investment

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to generate 1.2 times more return on investment than Cion Investment. However, Federal Agricultural is 1.2 times more volatile than Cion Investment Corp. It trades about -0.01 of its potential returns per unit of risk. Cion Investment Corp is currently generating about -0.03 per unit of risk. If you would invest  19,570  in Federal Agricultural Mortgage on December 27, 2024 and sell it today you would lose (274.00) from holding Federal Agricultural Mortgage or give up 1.4% of portfolio value over 90 days.

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

Federal Agricultural Mortgage  vs.  Cion Investment Corp

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. In spite of very healthy technical and fundamental indicators, Federal Agricultural is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Cion Investment Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cion Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cion Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Federal Agricultural and Cion Investment

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

The idea behind Federal Agricultural Mortgage and Cion Investment Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.