Correlation Between AgriBank FCB and Federal Agricultural

Can any of the company-specific risk be diversified away by investing in both AgriBank FCB and Federal Agricultural 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 AgriBank FCB and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AgriBank FCB and Federal Agricultural Mortgage, you can compare the effects of market volatilities on AgriBank FCB and Federal Agricultural 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 AgriBank FCB with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of AgriBank FCB and Federal Agricultural.

Diversification Opportunities for AgriBank FCB and Federal Agricultural

-0.29

Correlation Coefficient

AgriBank FCB  Federal Agricultural

Very good diversification

The 3 months correlation between AgriBank and Federal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding AgriBank FCB and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and AgriBank FCB 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 AgriBank FCB are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of AgriBank FCB i.e., AgriBank FCB and Federal Agricultural go up and down completely randomly.

Pair Corralation between AgriBank FCB and Federal Agricultural

If you would invest  10,050  in AgriBank FCB on September 12, 2024 and sell it today you would earn a total of  0.00  from holding AgriBank FCB or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

AgriBank FCB  vs.  Federal Agricultural Mortgage

AgriBank FCB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AgriBank FCB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, AgriBank FCB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Federal Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Federal Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AgriBank FCB and Federal Agricultural

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

The idea behind AgriBank FCB and Federal Agricultural Mortgage 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.