Correlation Between CNFinance Holdings and Federal Agricultural

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

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

Diversification Opportunities for CNFinance Holdings and Federal Agricultural

-0.51

Correlation Coefficient

CNFinance Holdings  Federal Agricultural

Excellent diversification

The 3 months correlation between CNFinance and Federal is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CNFinance 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 CNFinance Holdings 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 CNFinance 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 CNFinance Holdings i.e., CNFinance Holdings and Federal Agricultural go up and down completely randomly.

Pair Corralation between CNFinance Holdings and Federal Agricultural

Considering the 90-day investment horizon CNFinance Holdings is expected to under-perform the Federal Agricultural. In addition to that, CNFinance Holdings is 2.73 times more volatile than Federal Agricultural Mortgage. It trades about 0.0 of its total potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.08 per unit of volatility. If you would invest  10,776  in Federal Agricultural Mortgage on September 14, 2024 and sell it today you would earn a total of  10,247  from holding Federal Agricultural Mortgage or generate 95.09% return on investment over 90 days.

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

CNFinance Holdings  vs.  Federal Agricultural Mortgage

CNFinance Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Federal Agricultural

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Federal Agricultural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CNFinance Holdings and Federal Agricultural

The main advantage of trading using opposite CNFinance Holdings and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNFinance Holdings 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 CNFinance 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.