Correlation Between Federal Home and Playmates Toys

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

By analyzing existing cross correlation between Federal Home Loan and Playmates Toys Limited, you can compare the effects of market volatilities on Federal Home and Playmates Toys 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 Home with a short position of Playmates Toys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Playmates Toys.

Diversification Opportunities for Federal Home and Playmates Toys

-0.36

Correlation Coefficient

Federal Home  Playmates Toys

Very good diversification

The 3 months correlation between Federal and Playmates is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys and Federal Home 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 Federal Home Loan are associated (or correlated) with Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of Federal Home i.e., Federal Home and Playmates Toys go up and down completely randomly.

Pair Corralation between Federal Home and Playmates Toys

Assuming the 90 days horizon Federal Home Loan is expected to generate 1.11 times more return on investment than Playmates Toys. However, Federal Home is 1.11 times more volatile than Playmates Toys Limited. It trades about 0.5 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.04 per unit of risk. If you would invest  254.00  in Federal Home Loan on October 23, 2024 and sell it today you would earn a total of  376.00  from holding Federal Home Loan or generate 148.03% return on investment over 90 days.

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

Federal Home Loan  vs.  Playmates Toys Limited

Federal Home Loan

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

Playmates Toys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playmates Toys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Playmates Toys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Federal Home and Playmates Toys

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

The idea behind Federal Home Loan and Playmates Toys Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.