Correlation Between Rocket Companies and Federal National

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

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

Diversification Opportunities for Rocket Companies and Federal National

-0.83

Correlation Coefficient

Rocket Companies  Federal National

Pay attention - limited upside

The 3 months correlation between Rocket and Federal is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies 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 Rocket Companies 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 Rocket Companies 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 Rocket Companies i.e., Rocket Companies and Federal National go up and down completely randomly.

Pair Corralation between Rocket Companies and Federal National

Considering the 90-day investment horizon Rocket Companies is expected to generate 3.49 times less return on investment than Federal National. But when comparing it to its historical volatility, Rocket Companies is 2.11 times less risky than Federal National. It trades about 0.06 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  600,000  in Federal National Mortgage on September 1, 2024 and sell it today you would earn a total of  2,700,000  from holding Federal National Mortgage or generate 450.0% return on investment over 90 days.

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

Rocket Companies  vs.  Federal National Mortgage

Rocket Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals 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.

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.

Pair Trading with Rocket Companies and Federal National

The main advantage of trading using opposite Rocket Companies and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Companies 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 Rocket Companies 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.