Correlation Between Federal Home and INDIKA ENERGY

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

Diversification Opportunities for Federal Home and INDIKA ENERGY

0.31

Correlation Coefficient

Federal Home  INDIKA ENERGY

Weak diversification

The 3 months correlation between Federal and INDIKA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY 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 INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of Federal Home i.e., Federal Home and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between Federal Home and INDIKA ENERGY

Assuming the 90 days horizon Federal Home Loan is expected to generate 4.02 times more return on investment than INDIKA ENERGY. However, Federal Home is 4.02 times more volatile than INDIKA ENERGY. It trades about 0.18 of its potential returns per unit of risk. INDIKA ENERGY is currently generating about -0.08 per unit of risk. If you would invest  236.00  in Federal Home Loan on December 30, 2024 and sell it today you would earn a total of  294.00  from holding Federal Home Loan or generate 124.58% return on investment over 90 days.

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

Federal Home Loan  vs.  INDIKA ENERGY

Federal Home Loan

Risk-Adjusted Performance

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. Despite nearly fragile basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

INDIKA ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Federal Home and INDIKA ENERGY

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

The idea behind Federal Home Loan and INDIKA ENERGY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.