Correlation Between GOLD ROAD and Federal Agricultural

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

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

Diversification Opportunities for GOLD ROAD and Federal Agricultural

0.46

Correlation Coefficient

GOLD ROAD  Federal Agricultural

Very weak diversification

The 3 months correlation between GOLD and Federal is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and GOLD ROAD 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 GOLD ROAD RES 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 GOLD ROAD i.e., GOLD ROAD and Federal Agricultural go up and down completely randomly.

Pair Corralation between GOLD ROAD and Federal Agricultural

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 0.9 times more return on investment than Federal Agricultural. However, GOLD ROAD RES is 1.11 times less risky than Federal Agricultural. It trades about -0.02 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.27 per unit of risk. If you would invest  128.00  in GOLD ROAD RES on October 12, 2024 and sell it today you would lose (1.00) from holding GOLD ROAD RES or give up 0.78% of portfolio value over 90 days.

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

GOLD ROAD RES  vs.  Federal Agricultural Mortgage

GOLD ROAD RES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Federal Agricultural

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Agricultural may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GOLD ROAD and Federal Agricultural

The main advantage of trading using opposite GOLD ROAD and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD 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 GOLD ROAD RES 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.