Correlation Between Federal National and Bancolombia
Can any of the company-specific risk be diversified away by investing in both Federal National and Bancolombia 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 Bancolombia 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 Bancolombia SA ADR, you can compare the effects of market volatilities on Federal National and Bancolombia 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 Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Bancolombia.
Diversification Opportunities for Federal National and Bancolombia
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Bancolombia is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR 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 Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of Federal National i.e., Federal National and Bancolombia go up and down completely randomly.
Pair Corralation between Federal National and Bancolombia
Assuming the 90 days horizon Federal National is expected to generate 1.83 times less return on investment than Bancolombia. In addition to that, Federal National is 1.18 times more volatile than Bancolombia SA ADR. It trades about 0.13 of its total potential returns per unit of risk. Bancolombia SA ADR is currently generating about 0.28 per unit of volatility. If you would invest 3,183 in Bancolombia SA ADR on December 2, 2024 and sell it today you would earn a total of 989.00 from holding Bancolombia SA ADR or generate 31.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Federal National Mortgage vs. Bancolombia SA ADR
Performance |
Timeline |
Federal National Mortgage |
Bancolombia SA ADR |
Federal National and Bancolombia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal National and Bancolombia
The main advantage of trading using opposite Federal National and Bancolombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Bancolombia 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 Bancolombia will offset losses from the drop in Bancolombia's long position.Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
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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.
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