Correlation Between Federal Home and Federal Hme

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

By analyzing existing cross correlation between Federal Home Loan and Federal Hme 655, you can compare the effects of market volatilities on Federal Home and Federal Hme 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 Home with a short position of Federal Hme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Federal Hme.

Diversification Opportunities for Federal Home and Federal Hme

0.98

Correlation Coefficient

Federal Home  Federal Hme

Almost no diversification

The 3 months correlation between Federal and Federal is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Federal Hme 655 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Hme 655 and Federal Home 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 Home Loan are associated (or correlated) with Federal Hme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Hme 655 has no effect on the direction of Federal Home i.e., Federal Home and Federal Hme go up and down completely randomly.

Pair Corralation between Federal Home and Federal Hme

Assuming the 90 days horizon Federal Home is expected to generate 1.08 times less return on investment than Federal Hme. But when comparing it to its historical volatility, Federal Home Loan is 1.08 times less risky than Federal Hme. It trades about 0.2 of its potential returns per unit of risk. Federal Hme 655 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  318.00  in Federal Hme 655 on September 12, 2024 and sell it today you would earn a total of  578.00  from holding Federal Hme 655 or generate 181.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Federal Home Loan  vs.  Federal Hme 655

Federal Home Loan

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Federal Home displayed solid returns over the last few months and may actually be approaching a breakup point.

Federal Hme 655

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Hme 655 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward-looking signals, Federal Hme demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Home and Federal Hme

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

The idea behind Federal Home Loan and Federal Hme 655 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.