Correlation Between Federal Agricultural and Mastercard

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

Diversification Opportunities for Federal Agricultural and Mastercard

0.89

Correlation Coefficient

Federal Agricultural  Mastercard

Very poor diversification

The 3 months correlation between Federal and Mastercard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Mastercard go up and down completely randomly.

Pair Corralation between Federal Agricultural and Mastercard

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to under-perform the Mastercard. In addition to that, Federal Agricultural is 2.01 times more volatile than Mastercard. It trades about -0.06 of its total potential returns per unit of risk. Mastercard is currently generating about 0.07 per unit of volatility. If you would invest  51,946  in Mastercard on September 20, 2024 and sell it today you would earn a total of  619.00  from holding Mastercard or generate 1.19% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  Mastercard

Federal Agricultural

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Federal Agricultural displayed solid returns over the last few months and may actually be approaching a breakup point.

Mastercard

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Federal Agricultural and Mastercard

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

The idea behind Federal Agricultural Mortgage and Mastercard 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.