Correlation Between Federal Bank and Investment Trust

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

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

Diversification Opportunities for Federal Bank and Investment Trust

0.59

Correlation Coefficient

Federal Bank  Investment Trust

Very weak diversification

The 3 months correlation between Federal and Investment is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Federal Bank and The Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Trust and Federal Bank 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 The Federal Bank are associated (or correlated) with Investment Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Trust has no effect on the direction of Federal Bank i.e., Federal Bank and Investment Trust go up and down completely randomly.

Pair Corralation between Federal Bank and Investment Trust

Assuming the 90 days trading horizon The Federal Bank is expected to generate 0.66 times more return on investment than Investment Trust. However, The Federal Bank is 1.51 times less risky than Investment Trust. It trades about 0.13 of its potential returns per unit of risk. The Investment Trust is currently generating about 0.09 per unit of risk. If you would invest  18,652  in The Federal Bank on September 13, 2024 and sell it today you would earn a total of  2,816  from holding The Federal Bank or generate 15.1% return on investment over 90 days.

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

The Federal Bank  vs.  The Investment Trust

Federal Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Federal Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Federal Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Investment Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Investment Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Bank and Investment Trust

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

The idea behind The Federal Bank and The Investment Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.