Correlation Between Triad Group and Fannie Mae

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

By analyzing existing cross correlation between Triad Group PLC and Fannie Mae, you can compare the effects of market volatilities on Triad Group and Fannie Mae 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 Triad Group with a short position of Fannie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Triad Group and Fannie Mae.

Diversification Opportunities for Triad Group and Fannie Mae

0.36

Correlation Coefficient

Triad Group  Fannie Mae

Weak diversification

The 3 months correlation between Triad and Fannie is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Triad Group PLC and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae and Triad Group 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 Triad Group PLC are associated (or correlated) with Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Triad Group i.e., Triad Group and Fannie Mae go up and down completely randomly.

Pair Corralation between Triad Group and Fannie Mae

Assuming the 90 days trading horizon Triad Group is expected to generate 22.57 times less return on investment than Fannie Mae. But when comparing it to its historical volatility, Triad Group PLC is 4.36 times less risky than Fannie Mae. It trades about 0.04 of its potential returns per unit of risk. Fannie Mae is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Fannie Mae on September 25, 2024 and sell it today you would earn a total of  149.00  from holding Fannie Mae or generate 127.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.25%
Values	Daily Returns

Triad Group PLC  vs.  Fannie Mae

Triad Group PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Triad Group PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Triad Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Fannie Mae

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Triad Group and Fannie Mae

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

The idea behind Triad Group PLC and Fannie Mae 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.