Correlation Between Fannie Mae and European Metals
Can any of the company-specific risk be diversified away by investing in both Fannie Mae and European Metals 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 Fannie Mae and European Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fannie Mae and European Metals Holdings, you can compare the effects of market volatilities on Fannie Mae and European Metals 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 Fannie Mae with a short position of European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fannie Mae and European Metals.
Diversification Opportunities for Fannie Mae and European Metals
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fannie and European is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fannie Mae and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings and Fannie Mae 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 Fannie Mae are associated (or correlated) with European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Fannie Mae i.e., Fannie Mae and European Metals go up and down completely randomly.
Pair Corralation between Fannie Mae and European Metals
Assuming the 90 days trading horizon Fannie Mae is expected to generate 5.43 times more return on investment than European Metals. However, Fannie Mae is 5.43 times more volatile than European Metals Holdings. It trades about 0.4 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.37 per unit of risk. If you would invest 145.00 in Fannie Mae on August 27, 2024 and sell it today you would earn a total of 179.00 from holding Fannie Mae or generate 123.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Fannie Mae vs. European Metals Holdings
Performance |
| Timeline |
| Fannie Mae |
| European Metals Holdings |
Fannie Mae and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fannie Mae and European Metals
The main advantage of trading using opposite Fannie Mae and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fannie Mae position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' long position.| Fannie Mae vs. Samsung Electronics Co | Fannie Mae vs. Samsung Electronics Co | Fannie Mae vs. Hyundai Motor | Fannie Mae vs. Toyota Motor Corp |
| European Metals vs. Givaudan SA | European Metals vs. Antofagasta PLC | European Metals vs. Centamin PLC | European Metals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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