Correlation Between Fannie Mae and Personal Group

Can any of the company-specific risk be diversified away by investing in both Fannie Mae and Personal Group 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 Personal Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fannie Mae and Personal Group Holdings, you can compare the effects of market volatilities on Fannie Mae and Personal Group 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 Personal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fannie Mae and Personal Group.

Diversification Opportunities for Fannie Mae and Personal Group

0.59

Correlation Coefficient

Fannie Mae  Personal Group

Very weak diversification

The 3 months correlation between Fannie and Personal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fannie Mae and Personal Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Personal Group Holdings 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 Personal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Personal Group Holdings has no effect on the direction of Fannie Mae i.e., Fannie Mae and Personal Group go up and down completely randomly.

Pair Corralation between Fannie Mae and Personal Group

Assuming the 90 days trading horizon Fannie Mae is expected to generate 4.1 times more return on investment than Personal Group. However, Fannie Mae is 4.1 times more volatile than Personal Group Holdings. It trades about 0.21 of its potential returns per unit of risk. Personal Group Holdings is currently generating about 0.17 per unit of risk. If you would invest  121.00  in Fannie Mae on September 16, 2024 and sell it today you would earn a total of  145.00  from holding Fannie Mae or generate 119.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.76%
Values	Daily Returns

Fannie Mae  vs.  Personal Group Holdings

Fannie Mae

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

Personal Group Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Personal Group Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Personal Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fannie Mae and Personal Group

The main advantage of trading using opposite Fannie Mae and Personal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fannie Mae position performs unexpectedly, Personal Group 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 Personal Group will offset losses from the drop in Personal Group's long position.

The idea behind Fannie Mae and Personal Group Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.