Correlation Between Blackstone and Federal Agricultural

Can any of the company-specific risk be diversified away by investing in both Blackstone and Federal Agricultural 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 Blackstone and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blackstone Group and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Blackstone and Federal Agricultural 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 Blackstone with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blackstone and Federal Agricultural.

Diversification Opportunities for Blackstone and Federal Agricultural

0.76

Correlation Coefficient

Blackstone  Federal Agricultural

Poor diversification

The 3 months correlation between Blackstone and Federal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Blackstone Group and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Blackstone 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 Blackstone Group are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Blackstone i.e., Blackstone and Federal Agricultural go up and down completely randomly.

Pair Corralation between Blackstone and Federal Agricultural

Allowing for the 90-day total investment horizon Blackstone Group is expected to generate 0.9 times more return on investment than Federal Agricultural. However, Blackstone Group is 1.11 times less risky than Federal Agricultural. It trades about 0.28 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.1 per unit of risk. If you would invest  13,743  in Blackstone Group on September 3, 2024 and sell it today you would earn a total of  4,962  from holding Blackstone Group or generate 36.11% return on investment over 90 days.

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

Blackstone Group  vs.  Federal Agricultural Mortgage

Blackstone Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Blackstone showed solid returns over the last few months and may actually be approaching a breakup point.

Federal Agricultural

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Federal Agricultural displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blackstone and Federal Agricultural

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

The idea behind Blackstone Group and Federal Agricultural Mortgage 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.