Correlation Between Bread Financial and Federal Agricultural

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

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

Diversification Opportunities for Bread Financial and Federal Agricultural

0.22

Correlation Coefficient

Bread Financial  Federal Agricultural

Modest diversification

The 3 months correlation between Bread and Federal is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Bread Financial 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 Bread Financial Holdings 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 Bread Financial i.e., Bread Financial and Federal Agricultural go up and down completely randomly.

Pair Corralation between Bread Financial and Federal Agricultural

Considering the 90-day investment horizon Bread Financial Holdings is expected to under-perform the Federal Agricultural. In addition to that, Bread Financial is 1.36 times more volatile than Federal Agricultural Mortgage. It trades about -0.17 of its total potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.01 per unit of volatility. If you would invest  19,784  in Federal Agricultural Mortgage on December 18, 2024 and sell it today you would lose (358.00) from holding Federal Agricultural Mortgage or give up 1.81% of portfolio value over 90 days.

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

Bread Financial Holdings  vs.  Federal Agricultural Mortgage

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Bread Financial and Federal Agricultural

The main advantage of trading using opposite Bread Financial and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial 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 Bread Financial Holdings 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.