Correlation Between Federal Hme and Federal Home

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

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

Diversification Opportunities for Federal Hme and Federal Home

0.97

Correlation Coefficient

Federal Hme  Federal Home

Almost no diversification

The 3 months correlation between Federal and Federal is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Federal Hme 655 and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Federal Hme 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 Hme 655 are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Federal Hme i.e., Federal Hme and Federal Home go up and down completely randomly.

Pair Corralation between Federal Hme and Federal Home

Assuming the 90 days horizon Federal Hme 655 is expected to generate 1.06 times more return on investment than Federal Home. However, Federal Hme is 1.06 times more volatile than Federal Home Loan. It trades about 0.28 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.29 per unit of risk. If you would invest  784.00  in Federal Hme 655 on September 13, 2024 and sell it today you would earn a total of  121.00  from holding Federal Hme 655 or generate 15.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Federal Hme 655  vs.  Federal Home Loan

Federal Hme 655

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Hme 655 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting forward-looking signals, Federal Hme demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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. Even with relatively inconsistent fundamental indicators, Federal Home revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Hme and Federal Home

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

The idea behind Federal Hme 655 and Federal Home Loan 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.