Correlation Between Federal Agricultural and AGRICULTBK HADR/25

Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC, you can compare the effects of market volatilities on Federal Agricultural and AGRICULTBK HADR/25 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 AGRICULTBK HADR/25. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and AGRICULTBK HADR/25.

Diversification Opportunities for Federal Agricultural and AGRICULTBK HADR/25

0.61

Correlation Coefficient

Federal Agricultural  AGRICULTBK HADR/25

Poor diversification

The 3 months correlation between Federal and AGRICULTBK is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and AGRICULTBK HADR25 YC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGRICULTBK HADR/25 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 AGRICULTBK HADR/25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGRICULTBK HADR/25 has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and AGRICULTBK HADR/25 go up and down completely randomly.

Pair Corralation between Federal Agricultural and AGRICULTBK HADR/25

Assuming the 90 days horizon Federal Agricultural is expected to generate 1.29 times less return on investment than AGRICULTBK HADR/25. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.1 times less risky than AGRICULTBK HADR/25. It trades about 0.14 of its potential returns per unit of risk. AGRICULTBK HADR25 YC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  950.00  in AGRICULTBK HADR25 YC on September 5, 2024 and sell it today you would earn a total of  240.00  from holding AGRICULTBK HADR25 YC or generate 25.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  AGRICULTBK HADR25 YC

Federal Agricultural

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Federal Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

AGRICULTBK HADR/25

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AGRICULTBK HADR/25 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Agricultural and AGRICULTBK HADR/25

The main advantage of trading using opposite Federal Agricultural and AGRICULTBK HADR/25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 will offset losses from the drop in AGRICULTBK HADR/25's long position.

The idea behind Federal Agricultural Mortgage and AGRICULTBK HADR25 YC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.