Correlation Between DNA Brands and Federal National

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

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

Diversification Opportunities for DNA Brands and Federal National

-0.01

Correlation Coefficient

DNA Brands  Federal National

Good diversification

The 3 months correlation between DNA and Federal is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding DNA Brands 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 DNA Brands 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 DNA Brands 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 DNA Brands i.e., DNA Brands and Federal National go up and down completely randomly.

Pair Corralation between DNA Brands and Federal National

Given the investment horizon of 90 days DNA Brands is expected to generate 39.55 times more return on investment than Federal National. However, DNA Brands is 39.55 times more volatile than Federal National Mortgage. It trades about 0.16 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.08 per unit of risk. If you would invest  0.01  in DNA Brands on December 28, 2024 and sell it today you would earn a total of  0.00  from holding DNA Brands or generate 0.0% return on investment over 90 days.

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

DNA Brands  vs.  Federal National Mortgage

DNA Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DNA Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Federal National Mortgage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DNA Brands and Federal National

The main advantage of trading using opposite DNA Brands and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DNA Brands 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 DNA Brands 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.