Correlation Between Federal Agricultural and 90331HPL1

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Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and 90331HPL1 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 Agricultural and 90331HPL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and US BANK NATIONAL, you can compare the effects of market volatilities on Federal Agricultural and 90331HPL1 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 Agricultural with a short position of 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and 90331HPL1.

Diversification Opportunities for Federal Agricultural and 90331HPL1

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Federal and 90331HPL1 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL and Federal Agricultural 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 Agricultural Mortgage are associated (or correlated) with 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and 90331HPL1 go up and down completely randomly.

Pair Corralation between Federal Agricultural and 90331HPL1

Considering the 90-day investment horizon Federal Agricultural Mortgage is expected to generate 2.57 times more return on investment than 90331HPL1. However, Federal Agricultural is 2.57 times more volatile than US BANK NATIONAL. It trades about -0.1 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about -0.31 per unit of risk. If you would invest  18,958  in Federal Agricultural Mortgage on January 22, 2024 and sell it today you would lose (633.00) from holding Federal Agricultural Mortgage or give up 3.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy80.95%
ValuesDaily Returns

Federal Agricultural Mortgage  vs.  US BANK NATIONAL

 Performance 
       Timeline  
Federal Agricultural 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Federal Agricultural is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
US BANK NATIONAL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federal Agricultural and 90331HPL1 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Federal Agricultural and 90331HPL1

The main advantage of trading using opposite Federal Agricultural and 90331HPL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, 90331HPL1 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 90331HPL1 will offset losses from the drop in 90331HPL1's long position.
The idea behind Federal Agricultural Mortgage and US BANK NATIONAL 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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