Correlation Between Federal Agricultural and SYSTEMAIR
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and SYSTEMAIR 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 SYSTEMAIR 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 SYSTEMAIR AB, you can compare the effects of market volatilities on Federal Agricultural and SYSTEMAIR 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 SYSTEMAIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and SYSTEMAIR.
Diversification Opportunities for Federal Agricultural and SYSTEMAIR
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federal and SYSTEMAIR is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and SYSTEMAIR go up and down completely randomly.
Pair Corralation between Federal Agricultural and SYSTEMAIR
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.32 times more return on investment than SYSTEMAIR. However, Federal Agricultural is 1.32 times more volatile than SYSTEMAIR AB. It trades about -0.38 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about -0.66 per unit of risk. If you would invest 19,700 in Federal Agricultural Mortgage on October 16, 2024 and sell it today you would lose (1,600) from holding Federal Agricultural Mortgage or give up 8.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. SYSTEMAIR AB
Performance |
| Timeline |
| Federal Agricultural |
| SYSTEMAIR AB |
Federal Agricultural and SYSTEMAIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and SYSTEMAIR
The main advantage of trading using opposite Federal Agricultural and SYSTEMAIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, SYSTEMAIR 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 SYSTEMAIR will offset losses from the drop in SYSTEMAIR's long position.| Federal Agricultural vs. Marie Brizard Wine | Federal Agricultural vs. Laureate Education | Federal Agricultural vs. Strategic Education | Federal Agricultural vs. CHINA EDUCATION GROUP |
| SYSTEMAIR vs. WIMFARM SA EO | SYSTEMAIR vs. PICKN PAY STORES | SYSTEMAIR vs. Ross Stores | SYSTEMAIR vs. Federal Agricultural Mortgage |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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