Correlation Between Federal Agricultural and Brinker International
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Brinker International 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 Brinker International 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 Brinker International, you can compare the effects of market volatilities on Federal Agricultural and Brinker International 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 Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Brinker International.
Diversification Opportunities for Federal Agricultural and Brinker International
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federal and Brinker is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International 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 Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Brinker International go up and down completely randomly.
Pair Corralation between Federal Agricultural and Brinker International
Assuming the 90 days horizon Federal Agricultural is expected to generate 2.3 times less return on investment than Brinker International. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.28 times less risky than Brinker International. It trades about 0.17 of its potential returns per unit of risk. Brinker International is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 8,200 in Brinker International on September 16, 2024 and sell it today you would earn a total of 3,900 from holding Brinker International or generate 47.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Brinker International
Performance |
| Timeline |
| Federal Agricultural |
| Brinker International |
Federal Agricultural and Brinker International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Brinker International
The main advantage of trading using opposite Federal Agricultural and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Brinker International 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 Brinker International will offset losses from the drop in Brinker International's long position.| Federal Agricultural vs. Mastercard | Federal Agricultural vs. American Express | Federal Agricultural vs. ORIX Corporation | Federal Agricultural vs. Superior Plus Corp |
| Brinker International vs. Chuangs China Investments | Brinker International vs. Nufarm Limited | Brinker International vs. Federal Agricultural Mortgage | Brinker International vs. Virtus Investment Partners |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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