Correlation Between Nelnet and Federal Agricultural

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

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

Diversification Opportunities for Nelnet and Federal Agricultural

0.59

Correlation Coefficient

Nelnet  Federal Agricultural

Very weak diversification

The 3 months correlation between Nelnet and Federal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nelnet Inc and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Nelnet 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 Nelnet Inc are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Nelnet i.e., Nelnet and Federal Agricultural go up and down completely randomly.

Pair Corralation between Nelnet and Federal Agricultural

Considering the 90-day investment horizon Nelnet Inc is expected to generate 2.12 times more return on investment than Federal Agricultural. However, Nelnet is 2.12 times more volatile than Federal Agricultural Mortgage. It trades about -0.01 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.05 per unit of risk. If you would invest  11,079  in Nelnet Inc on September 12, 2024 and sell it today you would lose (262.00) from holding Nelnet Inc or give up 2.36% of portfolio value over 90 days.

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

Nelnet Inc  vs.  Federal Agricultural Mortgage

Nelnet Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nelnet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nelnet is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Federal Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nelnet and Federal Agricultural

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

The idea behind Nelnet Inc and Federal Agricultural Mortgage 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 Global Correlations module to find global opportunities by holding instruments from different markets.