Correlation Between Federal National and Jollibee Foods

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

Diversification Opportunities for Federal National and Jollibee Foods

-0.41

Correlation Coefficient

Federal National  Jollibee Foods

Very good diversification

The 3 months correlation between Federal and Jollibee is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Jollibee Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods 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 Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods has no effect on the direction of Federal National i.e., Federal National and Jollibee Foods go up and down completely randomly.

Pair Corralation between Federal National and Jollibee Foods

Assuming the 90 days horizon Federal National is expected to generate 10.27 times less return on investment than Jollibee Foods. But when comparing it to its historical volatility, Federal National Mortgage is 6.13 times less risky than Jollibee Foods. It trades about 0.09 of its potential returns per unit of risk. Jollibee Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Jollibee Foods on October 6, 2024 and sell it today you would earn a total of  132.00  from holding Jollibee Foods or generate 39.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Federal National Mortgage  vs.  Jollibee Foods

Federal National Mortgage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.

Jollibee Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Jollibee Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Federal National and Jollibee Foods

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

The idea behind Federal National Mortgage and Jollibee Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.