Correlation Between Rogers Sugar and Federal National

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

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

Diversification Opportunities for Rogers Sugar and Federal National

-0.38

Correlation Coefficient

Rogers Sugar  Federal National

Very good diversification

The 3 months correlation between Rogers and Federal is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rogers Sugar 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 Rogers Sugar 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 Rogers Sugar 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 Rogers Sugar i.e., Rogers Sugar and Federal National go up and down completely randomly.

Pair Corralation between Rogers Sugar and Federal National

Assuming the 90 days horizon Rogers Sugar is expected to generate 21.56 times less return on investment than Federal National. But when comparing it to its historical volatility, Rogers Sugar is 4.49 times less risky than Federal National. It trades about 0.03 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,420,000  in Federal National Mortgage on September 4, 2024 and sell it today you would earn a total of  1,880,000  from holding Federal National Mortgage or generate 132.39% return on investment over 90 days.

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

Rogers Sugar  vs.  Federal National Mortgage

Rogers Sugar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rogers Sugar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rogers Sugar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Federal National Mortgage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rogers Sugar and Federal National

The main advantage of trading using opposite Rogers Sugar and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rogers Sugar 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 Rogers Sugar 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.