Correlation Between Federal Agricultural and Sparta AG
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Sparta AG 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 Sparta AG 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 Sparta AG, you can compare the effects of market volatilities on Federal Agricultural and Sparta AG 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 Sparta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Sparta AG.
Diversification Opportunities for Federal Agricultural and Sparta AG
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Sparta is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Sparta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta AG 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 Sparta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta AG has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Sparta AG go up and down completely randomly.
Pair Corralation between Federal Agricultural and Sparta AG
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 11.05 times more return on investment than Sparta AG. However, Federal Agricultural is 11.05 times more volatile than Sparta AG. It trades about 0.27 of its potential returns per unit of risk. Sparta AG is currently generating about 0.0 per unit of risk. If you would invest 17,100 in Federal Agricultural Mortgage on August 31, 2024 and sell it today you would earn a total of 3,100 from holding Federal Agricultural Mortgage or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Sparta AG
Performance |
| Timeline |
| Federal Agricultural |
| Sparta AG |
Federal Agricultural and Sparta AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Sparta AG
The main advantage of trading using opposite Federal Agricultural and Sparta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Sparta AG 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 Sparta AG will offset losses from the drop in Sparta AG's long position.| Federal Agricultural vs. Mastercard | Federal Agricultural vs. PayPal Holdings | Federal Agricultural vs. Capital One Financial | 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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