Correlation Between RMG Acquisition and Federal National

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

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

Diversification Opportunities for RMG Acquisition and Federal National

-0.77

Correlation Coefficient

RMG Acquisition  Federal National

Pay attention - limited upside

The 3 months correlation between RMG and Federal is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding RMG Acquisition Corp 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 RMG Acquisition 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 RMG Acquisition Corp 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 RMG Acquisition i.e., RMG Acquisition and Federal National go up and down completely randomly.

Pair Corralation between RMG Acquisition and Federal National

If you would invest  1,260  in Federal National Mortgage on October 7, 2024 and sell it today you would earn a total of  690.00  from holding Federal National Mortgage or generate 54.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	2.44%
Values	Daily Returns

RMG Acquisition Corp  vs.  Federal National Mortgage

RMG Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RMG Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, RMG Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Federal National Mortgage

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Federal National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RMG Acquisition and Federal National

The main advantage of trading using opposite RMG Acquisition and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RMG Acquisition 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.

The idea behind RMG Acquisition Corp and Federal National 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.