Correlation Between CNFinance Holdings and Federal National

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

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

Diversification Opportunities for CNFinance Holdings and Federal National

-0.5

Correlation Coefficient

CNFinance Holdings  Federal National

Very good diversification

The 3 months correlation between CNFinance and Federal is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CNFinance Holdings and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and CNFinance Holdings 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 CNFinance Holdings are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of CNFinance Holdings i.e., CNFinance Holdings and Federal National go up and down completely randomly.

Pair Corralation between CNFinance Holdings and Federal National

Considering the 90-day investment horizon CNFinance Holdings is expected to generate 4.08 times less return on investment than Federal National. In addition to that, CNFinance Holdings is 1.12 times more volatile than Federal National Mortgage. It trades about 0.04 of its total potential returns per unit of risk. Federal National Mortgage is currently generating about 0.2 per unit of volatility. If you would invest  349.00  in Federal National Mortgage on September 15, 2024 and sell it today you would earn a total of  586.00  from holding Federal National Mortgage or generate 167.91% return on investment over 90 days.

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

CNFinance Holdings  vs.  Federal National Mortgage

CNFinance Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CNFinance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, CNFinance Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Federal National Mortgage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Federal National revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNFinance Holdings and Federal National

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

The idea behind CNFinance Holdings and Federal National 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.