Correlation Between CNFinance Holdings and Federal National

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

Diversification Opportunities for CNFinance Holdings and Federal National

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between CNFinance and Federal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CNFinance Holdings and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of CNFinance Holdings i.e., CNFinance Holdings and Federal National go up and down completely randomly.

Pair Corralation between CNFinance Holdings and Federal National

Considering the 90-day investment horizon CNFinance Holdings is expected to under-perform the Federal National. But the stock apears to be less risky and, when comparing its historical volatility, CNFinance Holdings is 1.6 times less risky than Federal National. The stock trades about -0.03 of its potential returns per unit of risk. The Federal National Mortgage is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  425.00  in Federal National Mortgage on October 23, 2024 and sell it today you would earn a total of  641.00  from holding Federal National Mortgage or generate 150.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CNFinance Holdings  vs.  Federal National Mortgage

 Performance 
       Timeline  
CNFinance Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CNFinance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Federal National Mortgage 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Federal National revealed solid returns over the last few months and may actually be approaching a breakup point.

CNFinance Holdings and Federal National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CNFinance Holdings and Federal National

The main advantage of trading using opposite CNFinance Holdings and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNFinance Holdings position performs unexpectedly, Federal National 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 National will offset losses from the drop in Federal National's long position.
The idea behind CNFinance Holdings and Federal National 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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