Correlation Between Federal Agricultural and Oportun Financial

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

Diversification Opportunities for Federal Agricultural and Oportun Financial

0.07

Correlation Coefficient

Federal Agricultural  Oportun Financial

Significant diversification

The 3 months correlation between Federal and Oportun is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Oportun Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oportun Financial Corp 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 Oportun Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oportun Financial Corp has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Oportun Financial go up and down completely randomly.

Pair Corralation between Federal Agricultural and Oportun Financial

Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 33.01 times more return on investment than Oportun Financial. However, Federal Agricultural is 33.01 times more volatile than Oportun Financial Corp. It trades about 0.12 of its potential returns per unit of risk. Oportun Financial Corp is currently generating about 0.13 per unit of risk. If you would invest  15,151  in Federal Agricultural Mortgage on August 30, 2024 and sell it today you would earn a total of  849.00  from holding Federal Agricultural Mortgage or generate 5.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	82.81%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  Oportun Financial Corp

Federal Agricultural

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady basic indicators, Federal Agricultural sustained solid returns over the last few months and may actually be approaching a breakup point.

Oportun Financial Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oportun Financial Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Oportun Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Agricultural and Oportun Financial

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

The idea behind Federal Agricultural Mortgage and Oportun Financial Corp 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.