Correlation Between Federal Agricultural and Air Liquide
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Air Liquide 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 Air Liquide 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 Air Liquide SA, you can compare the effects of market volatilities on Federal Agricultural and Air Liquide 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 Air Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Air Liquide.
Diversification Opportunities for Federal Agricultural and Air Liquide
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Federal and Air is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Air Liquide go up and down completely randomly.
Pair Corralation between Federal Agricultural and Air Liquide
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.6 times more return on investment than Air Liquide. However, Federal Agricultural is 1.6 times more volatile than Air Liquide SA. It trades about 0.07 of its potential returns per unit of risk. Air Liquide SA is currently generating about 0.04 per unit of risk. If you would invest 10,490 in Federal Agricultural Mortgage on September 3, 2024 and sell it today you would earn a total of 9,410 from holding Federal Agricultural Mortgage or generate 89.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Air Liquide SA
Performance |
| Timeline |
| Federal Agricultural |
| Air Liquide SA |
Federal Agricultural and Air Liquide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Air Liquide
The main advantage of trading using opposite Federal Agricultural and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Air Liquide 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 Air Liquide will offset losses from the drop in Air Liquide's long position.| Federal Agricultural vs. Visa Inc | Federal Agricultural vs. Visa Inc | Federal Agricultural vs. American Express | Federal Agricultural vs. ORIX Corporation |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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