Correlation Between Mr Cooper and Federal Agricultural

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

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

Diversification Opportunities for Mr Cooper and Federal Agricultural

0.1

Correlation Coefficient

Mr Cooper  Federal Agricultural

Average diversification

The 3 months correlation between COOP and Federal is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Mr Cooper Group and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Mr Cooper 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 Mr Cooper Group 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 Mr Cooper i.e., Mr Cooper and Federal Agricultural go up and down completely randomly.

Pair Corralation between Mr Cooper and Federal Agricultural

Given the investment horizon of 90 days Mr Cooper is expected to generate 1.0 times less return on investment than Federal Agricultural. But when comparing it to its historical volatility, Mr Cooper Group is 1.91 times less risky than Federal Agricultural. It trades about 0.24 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,522  in Federal Agricultural Mortgage on December 4, 2024 and sell it today you would earn a total of  944.00  from holding Federal Agricultural Mortgage or generate 4.84% return on investment over 90 days.

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

Mr Cooper Group  vs.  Federal Agricultural Mortgage

Mr Cooper Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Cooper Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Mr Cooper reported solid returns over the last few months and may actually be approaching a breakup point.

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 Mr Cooper and Federal Agricultural

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