Correlation Between Federal Hme and Federal National

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

By analyzing existing cross correlation between Federal Hme 655 and Federal National Mortgage, you can compare the effects of market volatilities on Federal Hme and Federal National 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 Hme with a short position of Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Hme and Federal National.

Diversification Opportunities for Federal Hme and Federal National

0.79

Correlation Coefficient

Federal Hme  Federal National

Poor diversification

The 3 months correlation between Federal and Federal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Federal Hme 655 and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and Federal Hme 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 Hme 655 are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Federal Hme i.e., Federal Hme and Federal National go up and down completely randomly.

Pair Corralation between Federal Hme and Federal National

Assuming the 90 days horizon Federal Hme 655 is expected to generate 1.04 times more return on investment than Federal National. However, Federal Hme is 1.04 times more volatile than Federal National Mortgage. It trades about -0.01 of its potential returns per unit of risk. Federal National Mortgage is currently generating about -0.02 per unit of risk. If you would invest  978.00  in Federal Hme 655 on December 21, 2024 and sell it today you would lose (23.00) from holding Federal Hme 655 or give up 2.35% of portfolio value over 90 days.

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

Federal Hme 655  vs.  Federal National Mortgage

Federal Hme 655

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Hme 655 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Federal Hme is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Federal National Mortgage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Federal National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Federal Hme and Federal National

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

The idea behind Federal Hme 655 and Federal National 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.