Correlation Between Federal National and Greystone Housing

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

Diversification Opportunities for Federal National and Greystone Housing

-0.84

Correlation Coefficient

Federal National  Greystone Housing

Pay attention - limited upside

The 3 months correlation between Federal and Greystone is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Greystone Housing Impact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greystone Housing Impact 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 Greystone Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greystone Housing Impact has no effect on the direction of Federal National i.e., Federal National and Greystone Housing go up and down completely randomly.

Pair Corralation between Federal National and Greystone Housing

Given the investment horizon of 90 days Federal National Mortgage is expected to generate 4.01 times more return on investment than Greystone Housing. However, Federal National is 4.01 times more volatile than Greystone Housing Impact. It trades about 0.2 of its potential returns per unit of risk. Greystone Housing Impact is currently generating about -0.11 per unit of risk. If you would invest  115.00  in Federal National Mortgage on September 4, 2024 and sell it today you would earn a total of  142.00  from holding Federal National Mortgage or generate 123.48% return on investment over 90 days.

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

Federal National Mortgage  vs.  Greystone Housing Impact

Federal National Mortgage

Risk-Adjusted Performance

15 of 100

Good

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

Greystone Housing Impact

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greystone Housing Impact has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Federal National and Greystone Housing

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

The idea behind Federal National Mortgage and Greystone Housing Impact 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.