Correlation Between Federal Agricultural and Visa

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

Diversification Opportunities for Federal Agricultural and Visa

0.95

Correlation Coefficient

Federal Agricultural  Visa

Almost no diversification

The 3 months correlation between Federal and Visa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Visa go up and down completely randomly.

Pair Corralation between Federal Agricultural and Visa

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to under-perform the Visa. In addition to that, Federal Agricultural is 2.13 times more volatile than Visa Class A. It trades about -0.06 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.08 per unit of volatility. If you would invest  31,185  in Visa Class A on September 20, 2024 and sell it today you would earn a total of  394.00  from holding Visa Class A or generate 1.26% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  Visa Class A

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.

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Federal Agricultural and Visa

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

The idea behind Federal Agricultural Mortgage and Visa Class A 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.