Correlation Between Home Point and Federal National

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

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

Diversification Opportunities for Home Point and Federal National

0.55

Correlation Coefficient

Home Point  Federal National

Very weak diversification

The 3 months correlation between Home and Federal is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Home Point Capital and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and Home Point 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 Home Point Capital are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Home Point i.e., Home Point and Federal National go up and down completely randomly.

Pair Corralation between Home Point and Federal National

If you would invest  618.00  in Federal National Mortgage on September 16, 2024 and sell it today you would earn a total of  1,157  from holding Federal National Mortgage or generate 187.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.54%
Values	Daily Returns

Home Point Capital  vs.  Federal National Mortgage

Home Point Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Point Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Home Point is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Federal National Mortgage

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal National Mortgage are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Federal National reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Point and Federal National

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

The idea behind Home Point Capital and Federal National Mortgage 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.