Correlation Between InMode and Federal Natl

Can any of the company-specific risk be diversified away by investing in both InMode and Federal Natl 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 InMode and Federal Natl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InMode and Federal Natl Pfd, you can compare the effects of market volatilities on InMode and Federal Natl 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 InMode with a short position of Federal Natl. Check out your portfolio center. Please also check ongoing floating volatility patterns of InMode and Federal Natl.

Diversification Opportunities for InMode and Federal Natl

-0.39

Correlation Coefficient

InMode  Federal Natl

Very good diversification

The 3 months correlation between InMode and Federal is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding InMode and Federal Natl Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Natl Pfd and InMode 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 InMode are associated (or correlated) with Federal Natl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Natl Pfd has no effect on the direction of InMode i.e., InMode and Federal Natl go up and down completely randomly.

Pair Corralation between InMode and Federal Natl

Given the investment horizon of 90 days InMode is expected to under-perform the Federal Natl. But the stock apears to be less risky and, when comparing its historical volatility, InMode is 1.23 times less risky than Federal Natl. The stock trades about -0.01 of its potential returns per unit of risk. The Federal Natl Pfd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,582  in Federal Natl Pfd on December 4, 2024 and sell it today you would earn a total of  238.00  from holding Federal Natl Pfd or generate 15.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

InMode  vs.  Federal Natl Pfd

InMode

Risk-Adjusted Performance

Very Weak

Over the last 90 days InMode has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, InMode is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Federal Natl Pfd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Natl Pfd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Federal Natl disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InMode and Federal Natl

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

The idea behind InMode and Federal Natl Pfd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.