Correlation Between Federal National and L Brands
Can any of the company-specific risk be diversified away by investing in both Federal National and L Brands 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 L Brands 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 L Brands, you can compare the effects of market volatilities on Federal National and L Brands 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 L Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and L Brands.
Diversification Opportunities for Federal National and L Brands
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Federal and L Brands is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and L Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Brands 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 L Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Brands has no effect on the direction of Federal National i.e., Federal National and L Brands go up and down completely randomly.
Pair Corralation between Federal National and L Brands
If you would invest 1,000,000 in Federal National Mortgage on January 24, 2024 and sell it today you would earn a total of 200,000 from holding Federal National Mortgage or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Federal National Mortgage vs. L Brands
Performance |
| Timeline |
| Federal National Mortgage |
| L Brands |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal National and L Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and L Brands
The main advantage of trading using opposite Federal National and L Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, L Brands 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 L Brands will offset losses from the drop in L Brands' long position.| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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