Correlation Between Federal Bank and Embassy Office

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

By analyzing existing cross correlation between The Federal Bank and Embassy Office Parks, you can compare the effects of market volatilities on Federal Bank and Embassy Office 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 Federal Bank with a short position of Embassy Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Bank and Embassy Office.

Diversification Opportunities for Federal Bank and Embassy Office

-0.12

Correlation Coefficient

Federal Bank  Embassy Office

Good diversification

The 3 months correlation between Federal and Embassy is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Federal Bank and Embassy Office Parks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Office Parks and Federal Bank 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 The Federal Bank are associated (or correlated) with Embassy Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Office Parks has no effect on the direction of Federal Bank i.e., Federal Bank and Embassy Office go up and down completely randomly.

Pair Corralation between Federal Bank and Embassy Office

Assuming the 90 days trading horizon The Federal Bank is expected to generate 1.37 times more return on investment than Embassy Office. However, Federal Bank is 1.37 times more volatile than Embassy Office Parks. It trades about 0.04 of its potential returns per unit of risk. Embassy Office Parks is currently generating about -0.09 per unit of risk. If you would invest  18,499  in The Federal Bank on October 26, 2024 and sell it today you would earn a total of  576.00  from holding The Federal Bank or generate 3.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

The Federal Bank  vs.  Embassy Office Parks

Federal Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Federal Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Federal Bank and Embassy Office

The main advantage of trading using opposite Federal Bank and Embassy Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Bank position performs unexpectedly, Embassy Office 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 Embassy Office will offset losses from the drop in Embassy Office's long position.

The idea behind The Federal Bank and Embassy Office Parks 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.