Correlation Between Alcatel Lucent and Federal Home

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Can any of the company-specific risk be diversified away by investing in both Alcatel Lucent and Federal Home 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 Alcatel Lucent and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcatel Lucent and Federal Home Loan, you can compare the effects of market volatilities on Alcatel Lucent and Federal Home 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 Alcatel Lucent with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcatel Lucent and Federal Home.

Diversification Opportunities for Alcatel Lucent and Federal Home

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Alcatel and Federal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alcatel Lucent and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Alcatel Lucent 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 Alcatel Lucent are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Alcatel Lucent i.e., Alcatel Lucent and Federal Home go up and down completely randomly.

Pair Corralation between Alcatel Lucent and Federal Home

If you would invest  571.00  in Federal Home Loan on January 25, 2024 and sell it today you would earn a total of  29.00  from holding Federal Home Loan or generate 5.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Alcatel Lucent  vs.  Federal Home Loan

 Performance 
       Timeline  
Alcatel Lucent 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Alcatel Lucent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Alcatel Lucent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Federal Home Loan 

Risk-Adjusted Performance

0 of 100

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

Alcatel Lucent and Federal Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcatel Lucent and Federal Home

The main advantage of trading using opposite Alcatel Lucent and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcatel Lucent position performs unexpectedly, Federal Home 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 Home will offset losses from the drop in Federal Home's long position.
The idea behind Alcatel Lucent and Federal Home Loan 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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