Correlation Between AGRICULTBK HADR/25 and Federal Agricultural

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Can any of the company-specific risk be diversified away by investing in both AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGRICULTBK HADR25 YC and Federal Agricultural Mortgage, you can compare the effects of market volatilities on AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGRICULTBK HADR/25 and Federal Agricultural.

Diversification Opportunities for AGRICULTBK HADR/25 and Federal Agricultural

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between AGRICULTBK and Federal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AGRICULTBK HADR25 YC and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 AGRICULTBK HADR/25 i.e., AGRICULTBK HADR/25 and Federal Agricultural go up and down completely randomly.

Pair Corralation between AGRICULTBK HADR/25 and Federal Agricultural

Assuming the 90 days trading horizon AGRICULTBK HADR/25 is expected to generate 4.18 times less return on investment than Federal Agricultural. But when comparing it to its historical volatility, AGRICULTBK HADR25 YC is 1.74 times less risky than Federal Agricultural. It trades about 0.13 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  16,700  in Federal Agricultural Mortgage on September 6, 2024 and sell it today you would earn a total of  3,500  from holding Federal Agricultural Mortgage or generate 20.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

AGRICULTBK HADR25 YC  vs.  Federal Agricultural Mortgage

 Performance 
       Timeline  
AGRICULTBK HADR/25 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGRICULTBK HADR/25 reported solid returns over the last few months and may actually be approaching a breakup point.
Federal Agricultural 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Federal Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

AGRICULTBK HADR/25 and Federal Agricultural Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AGRICULTBK HADR/25 and Federal Agricultural

The main advantage of trading using opposite AGRICULTBK HADR/25 and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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