Correlation Between Fannie Mae and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Fannie Mae and Diageo PLC 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 Fannie Mae and Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fannie Mae and Diageo PLC, you can compare the effects of market volatilities on Fannie Mae and Diageo PLC 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 Fannie Mae with a short position of Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fannie Mae and Diageo PLC.
Diversification Opportunities for Fannie Mae and Diageo PLC
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fannie and Diageo is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Fannie Mae and Diageo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC and Fannie Mae 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 Fannie Mae are associated (or correlated) with Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC has no effect on the direction of Fannie Mae i.e., Fannie Mae and Diageo PLC go up and down completely randomly.
Pair Corralation between Fannie Mae and Diageo PLC
Assuming the 90 days trading horizon Fannie Mae is expected to generate 6.77 times more return on investment than Diageo PLC. However, Fannie Mae is 6.77 times more volatile than Diageo PLC. It trades about 0.22 of its potential returns per unit of risk. Diageo PLC is currently generating about 0.0 per unit of risk. If you would invest 117.00 in Fannie Mae on September 25, 2024 and sell it today you would earn a total of 149.00 from holding Fannie Mae or generate 127.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 79.69% |
Values | Daily Returns |
Fannie Mae vs. Diageo PLC
Performance |
Timeline |
Fannie Mae |
Diageo PLC |
Fannie Mae and Diageo PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fannie Mae and Diageo PLC
The main advantage of trading using opposite Fannie Mae and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fannie Mae position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.Fannie Mae vs. Uniper SE | Fannie Mae vs. Mulberry Group PLC | Fannie Mae vs. London Security Plc | Fannie Mae vs. Triad Group PLC |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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