Correlation Between Sparta Capital and Federal National

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

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

Diversification Opportunities for Sparta Capital and Federal National

-0.87

Correlation Coefficient

Sparta Capital  Federal National

Pay attention - limited upside

The 3 months correlation between Sparta and Federal is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital 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 Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and Federal National go up and down completely randomly.

Pair Corralation between Sparta Capital and Federal National

Assuming the 90 days horizon Sparta Capital is expected to under-perform the Federal National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sparta Capital is 2.61 times less risky than Federal National. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Federal National Mortgage is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Federal National Mortgage on September 4, 2024 and sell it today you would earn a total of  155.00  from holding Federal National Mortgage or generate 134.78% return on investment over 90 days.

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

Sparta Capital  vs.  Federal National Mortgage

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Federal National Mortgage

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile primary indicators, Federal National sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparta Capital and Federal National

The main advantage of trading using opposite Sparta Capital and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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 Sparta Capital 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.