Correlation Between Federal Agricultural and BROADWIND ENRGY

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

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

Diversification Opportunities for Federal Agricultural and BROADWIND ENRGY

-0.77

Correlation Coefficient

Federal Agricultural  BROADWIND ENRGY

Pay attention - limited upside

The 3 months correlation between Federal and BROADWIND is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY and Federal Agricultural 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 Federal Agricultural Mortgage are associated (or correlated) with BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Federal Agricultural and BROADWIND ENRGY

Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 0.55 times more return on investment than BROADWIND ENRGY. However, Federal Agricultural Mortgage is 1.83 times less risky than BROADWIND ENRGY. It trades about 0.13 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about -0.05 per unit of risk. If you would invest  16,386  in Federal Agricultural Mortgage on September 28, 2024 and sell it today you would earn a total of  2,714  from holding Federal Agricultural Mortgage or generate 16.56% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  BROADWIND ENRGY

Federal Agricultural

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Federal Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

BROADWIND ENRGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BROADWIND ENRGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Federal Agricultural and BROADWIND ENRGY

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

The idea behind Federal Agricultural Mortgage and BROADWIND ENRGY 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.