Correlation Between Federal National and Alligator Energy

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

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

Diversification Opportunities for Federal National and Alligator Energy

-0.02

Correlation Coefficient

Federal National  Alligator Energy

Good diversification

The 3 months correlation between Federal and Alligator is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy and Federal National 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 National Mortgage are associated (or correlated) with Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Federal National i.e., Federal National and Alligator Energy go up and down completely randomly.

Pair Corralation between Federal National and Alligator Energy

Given the investment horizon of 90 days Federal National Mortgage is expected to generate 0.74 times more return on investment than Alligator Energy. However, Federal National Mortgage is 1.36 times less risky than Alligator Energy. It trades about 0.19 of its potential returns per unit of risk. Alligator Energy Limited is currently generating about 0.07 per unit of risk. If you would invest  262.00  in Federal National Mortgage on December 21, 2024 and sell it today you would earn a total of  340.00  from holding Federal National Mortgage or generate 129.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Federal National Mortgage  vs.  Alligator Energy Limited

Federal National Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Federal National sustained solid returns over the last few months and may actually be approaching a breakup point.

Alligator Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal National and Alligator Energy

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

The idea behind Federal National Mortgage and Alligator Energy 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 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.