Correlation Between Carlyle and Federal Home

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

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

Diversification Opportunities for Carlyle and Federal Home

0.65

Correlation Coefficient

Carlyle  Federal Home

Poor diversification

The 3 months correlation between Carlyle and Federal is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Carlyle 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 Carlyle Group are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Carlyle i.e., Carlyle and Federal Home go up and down completely randomly.

Pair Corralation between Carlyle and Federal Home

Allowing for the 90-day total investment horizon Carlyle is expected to generate 3.17 times less return on investment than Federal Home. But when comparing it to its historical volatility, Carlyle Group is 3.65 times less risky than Federal Home. It trades about 0.25 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Federal Home Loan on September 4, 2024 and sell it today you would earn a total of  158.00  from holding Federal Home Loan or generate 146.3% return on investment over 90 days.

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

Carlyle Group  vs.  Federal Home Loan

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Federal Home Loan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Federal Home exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Federal Home

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

The idea behind Carlyle Group and Federal Home Loan 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.