Correlation Between Federal National and Aytu BioScience

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

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

Diversification Opportunities for Federal National and Aytu BioScience

-0.86

Correlation Coefficient

Federal National  Aytu BioScience

Pay attention - limited upside

The 3 months correlation between Federal and Aytu is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Aytu BioScience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aytu BioScience and Federal National 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 National Mortgage are associated (or correlated) with Aytu BioScience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aytu BioScience has no effect on the direction of Federal National i.e., Federal National and Aytu BioScience go up and down completely randomly.

Pair Corralation between Federal National and Aytu BioScience

Assuming the 90 days horizon Federal National Mortgage is expected to generate 3.19 times more return on investment than Aytu BioScience. However, Federal National is 3.19 times more volatile than Aytu BioScience. It trades about 0.14 of its potential returns per unit of risk. Aytu BioScience is currently generating about -0.13 per unit of risk. If you would invest  1,420,000  in Federal National Mortgage on August 31, 2024 and sell it today you would earn a total of  1,880,000  from holding Federal National Mortgage or generate 132.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Federal National Mortgage  vs.  Aytu BioScience

Federal National Mortgage

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Federal National displayed solid returns over the last few months and may actually be approaching a breakup point.

Aytu BioScience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aytu BioScience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Federal National and Aytu BioScience

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

The idea behind Federal National Mortgage and Aytu BioScience 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .