Correlation Between Associated British and Freddie Mac
Can any of the company-specific risk be diversified away by investing in both Associated British and Freddie Mac 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 Associated British and Freddie Mac into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Freddie Mac, you can compare the effects of market volatilities on Associated British and Freddie Mac 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 Associated British with a short position of Freddie Mac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Freddie Mac.
Diversification Opportunities for Associated British and Freddie Mac
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Associated and Freddie is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Freddie Mac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freddie Mac and Associated British 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 Associated British Foods are associated (or correlated) with Freddie Mac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freddie Mac has no effect on the direction of Associated British i.e., Associated British and Freddie Mac go up and down completely randomly.
Pair Corralation between Associated British and Freddie Mac
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Freddie Mac. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 6.92 times less risky than Freddie Mac. The stock trades about -0.02 of its potential returns per unit of risk. The Freddie Mac is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 118.00 in Freddie Mac on September 15, 2024 and sell it today you would earn a total of 138.00 from holding Freddie Mac or generate 116.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Associated British Foods vs. Freddie Mac
Performance |
Timeline |
Associated British Foods |
Freddie Mac |
Associated British and Freddie Mac Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Associated British and Freddie Mac
The main advantage of trading using opposite Associated British and Freddie Mac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Freddie Mac 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 Freddie Mac will offset losses from the drop in Freddie Mac's long position.Associated British vs. Samsung Electronics Co | Associated British vs. Samsung Electronics Co | Associated British vs. Hyundai Motor | Associated British vs. Toyota Motor Corp |
Freddie Mac vs. Ebro Foods | Freddie Mac vs. Associated British Foods | Freddie Mac vs. JB Hunt Transport | Freddie Mac vs. Gamma Communications PLC |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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