Correlation Between Federal National and Pulmatrix

Can any of the company-specific risk be diversified away by investing in both Federal National and Pulmatrix 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 Pulmatrix 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 Pulmatrix, you can compare the effects of market volatilities on Federal National and Pulmatrix 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 Pulmatrix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Pulmatrix.

Diversification Opportunities for Federal National and Pulmatrix

0.79

Correlation Coefficient

Federal National  Pulmatrix

Poor diversification

The 3 months correlation between Federal and Pulmatrix is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Pulmatrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmatrix 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 Pulmatrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmatrix has no effect on the direction of Federal National i.e., Federal National and Pulmatrix go up and down completely randomly.

Pair Corralation between Federal National and Pulmatrix

Assuming the 90 days horizon Federal National is expected to generate 1.18 times less return on investment than Pulmatrix. In addition to that, Federal National is 1.18 times more volatile than Pulmatrix. It trades about 0.14 of its total potential returns per unit of risk. Pulmatrix is currently generating about 0.2 per unit of volatility. If you would invest  208.00  in Pulmatrix on September 3, 2024 and sell it today you would earn a total of  456.00  from holding Pulmatrix or generate 219.23% return on investment over 90 days.

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

Federal National Mortgage  vs.  Pulmatrix

Federal National Mortgage

Risk-Adjusted Performance

11 of 100

Good

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.

Pulmatrix

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Federal National and Pulmatrix

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

The idea behind Federal National Mortgage and Pulmatrix 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.