Correlation Between Federal National and SunPower

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

Diversification Opportunities for Federal National and SunPower

0.0

Correlation Coefficient

Federal National  SunPower

Pay attention - limited upside

The 3 months correlation between Federal and SunPower is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and SunPower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunPower 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 SunPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunPower has no effect on the direction of Federal National i.e., Federal National and SunPower go up and down completely randomly.

Pair Corralation between Federal National and SunPower

If you would invest  3,400,000  in Federal National Mortgage on December 22, 2024 and sell it today you would earn a total of  300,000  from holding Federal National Mortgage or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Federal National Mortgage  vs.  SunPower

Federal National Mortgage

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SunPower

Risk-Adjusted Performance

Very Weak

Over the last 90 days SunPower has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SunPower is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Federal National and SunPower

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

The idea behind Federal National Mortgage and SunPower 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.