Correlation Between Federal National and Terns Pharmaceuticals

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

Diversification Opportunities for Federal National and Terns Pharmaceuticals

-0.28

Correlation Coefficient

Federal National  Terns Pharmaceuticals

Very good diversification

The 3 months correlation between Federal and Terns is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Federal National i.e., Federal National and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Federal National and Terns Pharmaceuticals

Assuming the 90 days horizon Federal National Mortgage is expected to generate 0.88 times more return on investment than Terns Pharmaceuticals. However, Federal National Mortgage is 1.13 times less risky than Terns Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.23 per unit of risk. If you would invest  3,400,000  in Federal National Mortgage on December 29, 2024 and sell it today you would earn a total of  500,000  from holding Federal National Mortgage or generate 14.71% return on investment over 90 days.

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

Federal National Mortgage  vs.  Terns Pharmaceuticals

Federal National Mortgage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 6 (%) 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.

Terns Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Federal National and Terns Pharmaceuticals

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

The idea behind Federal National Mortgage and Terns Pharmaceuticals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.