Correlation Between Federal Agricultural and 180 Degree
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and 180 Degree 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 180 Degree 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 180 Degree Capital, you can compare the effects of market volatilities on Federal Agricultural and 180 Degree 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 180 Degree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and 180 Degree.
Diversification Opportunities for Federal Agricultural and 180 Degree
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and 180 is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and 180 Degree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 180 Degree Capital 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 180 Degree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 180 Degree Capital has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and 180 Degree go up and down completely randomly.
Pair Corralation between Federal Agricultural and 180 Degree
Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to under-perform the 180 Degree. But the stock apears to be less risky and, when comparing its historical volatility, Federal Agricultural Mortgage is 1.15 times less risky than 180 Degree. The stock trades about -0.01 of its potential returns per unit of risk. The 180 Degree Capital is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 367.00 in 180 Degree Capital on December 26, 2024 and sell it today you would earn a total of 32.00 from holding 180 Degree Capital or generate 8.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Federal Agricultural Mortgage vs. 180 Degree Capital
Performance |
Timeline |
Federal Agricultural |
180 Degree Capital |
Federal Agricultural and 180 Degree Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Agricultural and 180 Degree
The main advantage of trading using opposite Federal Agricultural and 180 Degree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, 180 Degree 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 180 Degree will offset losses from the drop in 180 Degree's long position.The idea behind Federal Agricultural Mortgage and 180 Degree Capital 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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