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

-0.09

Correlation Coefficient

Federal Agricultural  180 Degree

Good diversification

The 3 months correlation between Federal and 180 is -0.09. 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 generate 1.28 times more return on investment than 180 Degree. However, Federal Agricultural is 1.28 times more volatile than 180 Degree Capital. It trades about 0.03 of its potential returns per unit of risk. 180 Degree Capital is currently generating about 0.0 per unit of risk. If you would invest  18,637  in Federal Agricultural Mortgage on December 5, 2024 and sell it today you would earn a total of  1,577  from holding Federal Agricultural Mortgage or generate 8.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.56%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  180 Degree Capital

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.

180 Degree Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 180 Degree Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, 180 Degree may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.