Correlation Between Federal Agricultural and China Shengmu
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and China Shengmu 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 China Shengmu 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 China Shengmu Organic, you can compare the effects of market volatilities on Federal Agricultural and China Shengmu 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 China Shengmu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and China Shengmu.
Diversification Opportunities for Federal Agricultural and China Shengmu
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federal and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and China Shengmu Organic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Shengmu Organic 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 China Shengmu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Shengmu Organic has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and China Shengmu go up and down completely randomly.
Pair Corralation between Federal Agricultural and China Shengmu
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 0.63 times more return on investment than China Shengmu. However, Federal Agricultural Mortgage is 1.59 times less risky than China Shengmu. It trades about 0.05 of its potential returns per unit of risk. China Shengmu Organic is currently generating about 0.02 per unit of risk. If you would invest 12,476 in Federal Agricultural Mortgage on November 28, 2024 and sell it today you would earn a total of 7,024 from holding Federal Agricultural Mortgage or generate 56.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. China Shengmu Organic
Performance |
| Timeline |
| Federal Agricultural |
| China Shengmu Organic |
Federal Agricultural and China Shengmu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and China Shengmu
The main advantage of trading using opposite Federal Agricultural and China Shengmu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, China Shengmu 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 China Shengmu will offset losses from the drop in China Shengmu's long position.| Federal Agricultural vs. RCS Mediagroup SpA | Federal Agricultural vs. CNVISION MEDIA | Federal Agricultural vs. Universal Entertainment | Federal Agricultural vs. Aegean Airlines SA |
| China Shengmu vs. Daido Steel Co | China Shengmu vs. IDP EDUCATION LTD | China Shengmu vs. Khiron Life Sciences | China Shengmu vs. EMBARK EDUCATION LTD |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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