Correlation Between Premium Brands and Federal National
Can any of the company-specific risk be diversified away by investing in both Premium Brands and Federal National 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 Premium Brands and Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premium Brands Holdings and Federal National Mortgage, you can compare the effects of market volatilities on Premium Brands and Federal National 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 Premium Brands with a short position of Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and Federal National.
Diversification Opportunities for Premium Brands and Federal National
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Premium and Federal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Premium Brands i.e., Premium Brands and Federal National go up and down completely randomly.
Pair Corralation between Premium Brands and Federal National
Assuming the 90 days horizon Premium Brands is expected to generate 33.77 times less return on investment than Federal National. But when comparing it to its historical volatility, Premium Brands Holdings is 2.22 times less risky than Federal National. It trades about 0.01 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.08 of returns per unit of risk over similar time horizon. 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 | 91.8% |
Values | Daily Returns |
Premium Brands Holdings vs. Federal National Mortgage
Performance |
Timeline |
Premium Brands Holdings |
Federal National Mortgage |
Premium Brands and Federal National Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Premium Brands and Federal National
The main advantage of trading using opposite Premium Brands and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Brands position performs unexpectedly, Federal National 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 National will offset losses from the drop in Federal National's long position.Premium Brands vs. Maple Leaf Foods | Premium Brands vs. Power of | Premium Brands vs. The North West | Premium Brands vs. Badger Infrastructure Solutions |
Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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