Correlation Between Federal Agricultural and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and China BlueChemical 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 China BlueChemical 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 China BlueChemical, you can compare the effects of market volatilities on Federal Agricultural and China BlueChemical 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 China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and China BlueChemical.
Diversification Opportunities for Federal Agricultural and China BlueChemical
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Federal and China is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical 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 China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and China BlueChemical go up and down completely randomly.
Pair Corralation between Federal Agricultural and China BlueChemical
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 0.57 times more return on investment than China BlueChemical. However, Federal Agricultural Mortgage is 1.74 times less risky than China BlueChemical. It trades about 0.17 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.08 per unit of risk. If you would invest 16,262 in Federal Agricultural Mortgage on September 11, 2024 and sell it today you would earn a total of 3,638 from holding Federal Agricultural Mortgage or generate 22.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Federal Agricultural Mortgage vs. China BlueChemical
Performance |
Timeline |
Federal Agricultural |
China BlueChemical |
Federal Agricultural and China BlueChemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Agricultural and China BlueChemical
The main advantage of trading using opposite Federal Agricultural and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.Federal Agricultural vs. Visa Inc | Federal Agricultural vs. ORIX Corporation | Federal Agricultural vs. Superior Plus Corp | Federal Agricultural vs. NMI Holdings |
China BlueChemical vs. Superior Plus Corp | China BlueChemical vs. NMI Holdings | China BlueChemical vs. Origin Agritech | China BlueChemical vs. SIVERS SEMICONDUCTORS AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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