Correlation Between Federal National and Tinley Beverage

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

Diversification Opportunities for Federal National and Tinley Beverage

0.11

Correlation Coefficient

Federal National  Tinley Beverage

Average diversification

The 3 months correlation between Federal and Tinley is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and The Tinley Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinley Beverage 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 Tinley Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinley Beverage has no effect on the direction of Federal National i.e., Federal National and Tinley Beverage go up and down completely randomly.

Pair Corralation between Federal National and Tinley Beverage

Assuming the 90 days horizon Federal National is expected to generate 3.92 times less return on investment than Tinley Beverage. But when comparing it to its historical volatility, Federal National Mortgage is 4.81 times less risky than Tinley Beverage. It trades about 0.08 of its potential returns per unit of risk. The Tinley Beverage is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.30  in The Tinley Beverage on December 30, 2024 and sell it today you would earn a total of  0.10  from holding The Tinley Beverage or generate 4.35% return on investment over 90 days.

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

Federal National Mortgage  vs.  The Tinley Beverage

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.

Tinley Beverage

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Tinley Beverage are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Tinley Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal National and Tinley Beverage

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

The idea behind Federal National Mortgage and The Tinley Beverage 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.