Correlation Between Federal National and Widgie Nickel

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

Diversification Opportunities for Federal National and Widgie Nickel

-0.42

Correlation Coefficient

Federal National  Widgie Nickel

Very good diversification

The 3 months correlation between Federal and Widgie is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Widgie Nickel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Widgie Nickel Limited 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 Widgie Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Widgie Nickel Limited has no effect on the direction of Federal National i.e., Federal National and Widgie Nickel go up and down completely randomly.

Pair Corralation between Federal National and Widgie Nickel

Assuming the 90 days horizon Federal National is expected to generate 45.63 times less return on investment than Widgie Nickel. But when comparing it to its historical volatility, Federal National Mortgage is 21.44 times less risky than Widgie Nickel. It trades about 0.06 of its potential returns per unit of risk. Widgie Nickel Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Widgie Nickel Limited on December 22, 2024 and sell it today you would lose (0.79) from holding Widgie Nickel Limited or give up 79.0% of portfolio value over 90 days.

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

Federal National Mortgage  vs.  Widgie Nickel Limited

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.

Widgie Nickel Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Widgie Nickel Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Widgie Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal National and Widgie Nickel

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

The idea behind Federal National Mortgage and Widgie Nickel Limited 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 CEOs Directory module to screen CEOs from public companies around the world.