Correlation Between Federal Home and Guild Holdings

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

Diversification Opportunities for Federal Home and Guild Holdings

-0.34

Correlation Coefficient

Federal Home  Guild Holdings

Very good diversification

The 3 months correlation between Federal and Guild is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Guild Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guild Holdings 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 Guild Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guild Holdings has no effect on the direction of Federal Home i.e., Federal Home and Guild Holdings go up and down completely randomly.

Pair Corralation between Federal Home and Guild Holdings

Assuming the 90 days horizon Federal Home Loan is expected to generate 1.67 times more return on investment than Guild Holdings. However, Federal Home is 1.67 times more volatile than Guild Holdings Co. It trades about 0.06 of its potential returns per unit of risk. Guild Holdings Co is currently generating about 0.02 per unit of risk. If you would invest  1,674  in Federal Home Loan on December 21, 2024 and sell it today you would earn a total of  161.00  from holding Federal Home Loan or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Federal Home Loan  vs.  Guild Holdings Co

Federal Home Loan

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Federal Home displayed solid returns over the last few months and may actually be approaching a breakup point.

Guild Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guild Holdings Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Guild Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Federal Home and Guild Holdings

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

The idea behind Federal Home Loan and Guild Holdings Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.