Correlation Between Federal National and BlackBerry

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

Diversification Opportunities for Federal National and BlackBerry

0.71

Correlation Coefficient

Federal National  BlackBerry

Poor diversification

The 3 months correlation between Federal and BlackBerry is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry 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 BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Federal National i.e., Federal National and BlackBerry go up and down completely randomly.

Pair Corralation between Federal National and BlackBerry

Given the investment horizon of 90 days Federal National Mortgage is expected to generate 4.05 times more return on investment than BlackBerry. However, Federal National is 4.05 times more volatile than BlackBerry. It trades about 0.44 of its potential returns per unit of risk. BlackBerry is currently generating about 0.1 per unit of risk. If you would invest  262.00  in Federal National Mortgage on October 24, 2024 and sell it today you would earn a total of  429.00  from holding Federal National Mortgage or generate 163.74% return on investment over 90 days.

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

Federal National Mortgage  vs.  BlackBerry

Federal National Mortgage

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Federal National sustained solid returns over the last few months and may actually be approaching a breakup point.

BlackBerry

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackBerry are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, BlackBerry sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal National and BlackBerry

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

The idea behind Federal National Mortgage and BlackBerry 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.