Correlation Between Freddie Mac and Power Metal
Can any of the company-specific risk be diversified away by investing in both Freddie Mac and Power Metal 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 Freddie Mac and Power Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freddie Mac and Power Metal Resources, you can compare the effects of market volatilities on Freddie Mac and Power Metal 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 Freddie Mac with a short position of Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freddie Mac and Power Metal.
Diversification Opportunities for Freddie Mac and Power Metal
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Freddie and Power is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Freddie Mac and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources and Freddie Mac 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 Freddie Mac are associated (or correlated) with Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Freddie Mac i.e., Freddie Mac and Power Metal go up and down completely randomly.
Pair Corralation between Freddie Mac and Power Metal
Assuming the 90 days trading horizon Freddie Mac is expected to generate 2.52 times more return on investment than Power Metal. However, Freddie Mac is 2.52 times more volatile than Power Metal Resources. It trades about 0.46 of its potential returns per unit of risk. Power Metal Resources is currently generating about 0.2 per unit of risk. If you would invest 134.00 in Freddie Mac on August 27, 2024 and sell it today you would earn a total of 207.00 from holding Freddie Mac or generate 154.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freddie Mac vs. Power Metal Resources
Performance |
| Timeline |
| Freddie Mac |
| Power Metal Resources |
Freddie Mac and Power Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freddie Mac and Power Metal
The main advantage of trading using opposite Freddie Mac and Power Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freddie Mac position performs unexpectedly, Power Metal 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 Power Metal will offset losses from the drop in Power Metal's long position.| Freddie Mac vs. Young Cos Brewery | Freddie Mac vs. Home Depot | Freddie Mac vs. Tatton Asset Management | Freddie Mac vs. Pets at Home |
| Power Metal vs. Givaudan SA | Power Metal vs. Antofagasta PLC | Power Metal vs. Centamin PLC | Power Metal vs. Atalaya Mining |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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