Correlation Between Trane Technologies and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Trane Technologies and Federal Agricultural 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 Trane Technologies and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trane Technologies plc and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Trane Technologies and Federal Agricultural 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 Trane Technologies with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Federal Agricultural.
Diversification Opportunities for Trane Technologies and Federal Agricultural
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Trane and Federal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Trane Technologies 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 Trane Technologies plc are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Trane Technologies i.e., Trane Technologies and Federal Agricultural go up and down completely randomly.
Pair Corralation between Trane Technologies and Federal Agricultural
Assuming the 90 days horizon Trane Technologies plc is expected to generate 0.75 times more return on investment than Federal Agricultural. However, Trane Technologies plc is 1.34 times less risky than Federal Agricultural. It trades about 0.12 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of risk. If you would invest 15,490 in Trane Technologies plc on September 13, 2024 and sell it today you would earn a total of 22,230 from holding Trane Technologies plc or generate 143.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trane Technologies plc vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Trane Technologies plc |
| Federal Agricultural |
Trane Technologies and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trane Technologies and Federal Agricultural
The main advantage of trading using opposite Trane Technologies and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies position performs unexpectedly, Federal Agricultural 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 Agricultural will offset losses from the drop in Federal Agricultural's long position.| Trane Technologies vs. Federal Agricultural Mortgage | Trane Technologies vs. Penta Ocean Construction Co | Trane Technologies vs. Materialise NV | Trane Technologies vs. Daito Trust Construction |
| Federal Agricultural vs. Ming Le Sports | Federal Agricultural vs. Monster Beverage Corp | Federal Agricultural vs. PLAYSTUDIOS A DL 0001 | Federal Agricultural vs. Columbia Sportswear |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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