Correlation Between Federal Agricultural and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Hitachi Construction 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 Hitachi Construction 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 Hitachi Construction Machinery, you can compare the effects of market volatilities on Federal Agricultural and Hitachi Construction 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 Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Hitachi Construction.
Diversification Opportunities for Federal Agricultural and Hitachi Construction
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Hitachi is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction 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 Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Hitachi Construction go up and down completely randomly.
Pair Corralation between Federal Agricultural and Hitachi Construction
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.12 times more return on investment than Hitachi Construction. However, Federal Agricultural is 1.12 times more volatile than Hitachi Construction Machinery. It trades about 0.21 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.01 per unit of risk. If you would invest 16,500 in Federal Agricultural Mortgage on August 30, 2024 and sell it today you would earn a total of 3,500 from holding Federal Agricultural Mortgage or generate 21.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Federal Agricultural |
| Hitachi Construction |
Federal Agricultural and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Hitachi Construction
The main advantage of trading using opposite Federal Agricultural and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| Federal Agricultural vs. Visa Inc | Federal Agricultural vs. Visa Inc | Federal Agricultural vs. PayPal Holdings | Federal Agricultural vs. Capital One Financial |
| Hitachi Construction vs. CNH Industrial NV | Hitachi Construction vs. Terex | Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. NMI Holdings |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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