Correlation Between Federal Agricultural and AECOM TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY 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 AECOM TECHNOLOGY, you can compare the effects of market volatilities on Federal Agricultural and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and AECOM TECHNOLOGY.
Diversification Opportunities for Federal Agricultural and AECOM TECHNOLOGY
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and AECOM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and AECOM TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM TECHNOLOGY has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and AECOM TECHNOLOGY go up and down completely randomly.
Pair Corralation between Federal Agricultural and AECOM TECHNOLOGY
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.43 times more return on investment than AECOM TECHNOLOGY. However, Federal Agricultural is 1.43 times more volatile than AECOM TECHNOLOGY. It trades about -0.1 of its potential returns per unit of risk. AECOM TECHNOLOGY is currently generating about -0.15 per unit of risk. If you would invest 19,762 in Federal Agricultural Mortgage on October 30, 2024 and sell it today you would lose (1,162) from holding Federal Agricultural Mortgage or give up 5.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. AECOM TECHNOLOGY
Performance |
| Timeline |
| Federal Agricultural |
| AECOM TECHNOLOGY |
Federal Agricultural and AECOM TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and AECOM TECHNOLOGY
The main advantage of trading using opposite Federal Agricultural and AECOM TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, AECOM TECHNOLOGY 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 AECOM TECHNOLOGY will offset losses from the drop in AECOM TECHNOLOGY's long position.| Federal Agricultural vs. Aluminum of | Federal Agricultural vs. SOUTHWEST AIRLINES | Federal Agricultural vs. Southwest Airlines Co | Federal Agricultural vs. Jacquet Metal Service |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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