Correlation Between Federal National and Guild Holdings

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

Diversification Opportunities for Federal National and Guild Holdings

-0.78

Correlation Coefficient

Federal National  Guild Holdings

Pay attention - limited upside

The 3 months correlation between Federal and Guild is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage 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 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 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 National i.e., Federal National and Guild Holdings go up and down completely randomly.

Pair Corralation between Federal National and Guild Holdings

Given the investment horizon of 90 days Federal National Mortgage is expected to generate 4.78 times more return on investment than Guild Holdings. However, Federal National is 4.78 times more volatile than Guild Holdings Co. It trades about 0.21 of its potential returns per unit of risk. Guild Holdings Co is currently generating about -0.2 per unit of risk. If you would invest  117.00  in Federal National Mortgage on September 13, 2024 and sell it today you would earn a total of  154.00  from holding Federal National Mortgage or generate 131.62% return on investment over 90 days.

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

Federal National Mortgage  vs.  Guild Holdings Co

Federal National Mortgage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Federal National sustained solid returns over the last few months and may actually be approaching a breakup point.

Guild Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Federal National and Guild Holdings

The main advantage of trading using opposite Federal National and Guild Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National 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 National Mortgage 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.