Correlation Between Mr Cooper and Federal Home

Can any of the company-specific risk be diversified away by investing in both Mr Cooper 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 Mr Cooper and Federal Home 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 Home Loan, you can compare the effects of market volatilities on Mr Cooper 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 Mr Cooper with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mr Cooper and Federal Home.

Diversification Opportunities for Mr Cooper and Federal Home

0.73

Correlation Coefficient

Mr Cooper  Federal Home

Poor diversification

The 3 months correlation between COOP and Federal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mr Cooper 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 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 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 Mr Cooper i.e., Mr Cooper and Federal Home go up and down completely randomly.

Pair Corralation between Mr Cooper and Federal Home

Given the investment horizon of 90 days Mr Cooper is expected to generate 58.45 times less return on investment than Federal Home. But when comparing it to its historical volatility, Mr Cooper Group is 7.11 times less risky than Federal Home. It trades about 0.02 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  633.00  in Federal Home Loan on September 13, 2024 and sell it today you would earn a total of  1,142  from holding Federal Home Loan or generate 180.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Mr Cooper Group  vs.  Federal Home Loan

Mr Cooper Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mr Cooper Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Mr Cooper is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Federal Home Loan

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Federal Home displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mr Cooper and Federal Home

The main advantage of trading using opposite Mr Cooper and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mr Cooper 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 Mr Cooper 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.