Correlation Between Federal Agricultural and Oaktree Specialty

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

Diversification Opportunities for Federal Agricultural and Oaktree Specialty

-0.29

Correlation Coefficient

Federal Agricultural  Oaktree Specialty

Very good diversification

The 3 months correlation between Federal and Oaktree is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending 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 Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Oaktree Specialty go up and down completely randomly.

Pair Corralation between Federal Agricultural and Oaktree Specialty

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to generate 1.68 times more return on investment than Oaktree Specialty. However, Federal Agricultural is 1.68 times more volatile than Oaktree Specialty Lending. It trades about 0.05 of its potential returns per unit of risk. Oaktree Specialty Lending is currently generating about -0.09 per unit of risk. If you would invest  18,003  in Federal Agricultural Mortgage on September 30, 2024 and sell it today you would earn a total of  1,722  from holding Federal Agricultural Mortgage or generate 9.57% return on investment over 90 days.

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

Federal Agricultural Mortgage  vs.  Oaktree Specialty Lending

Federal Agricultural

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Federal Agricultural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Federal Agricultural and Oaktree Specialty

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

The idea behind Federal Agricultural Mortgage and Oaktree Specialty Lending 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.