Correlation Between Federal Agricultural and Owl Rock
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural and Owl Rock 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 Owl Rock 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 Owl Rock Capital, you can compare the effects of market volatilities on Federal Agricultural and Owl Rock 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 Owl Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Owl Rock.
Diversification Opportunities for Federal Agricultural and Owl Rock
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federal and Owl is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Owl Rock Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owl Rock Capital 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 Owl Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owl Rock Capital has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and Owl Rock go up and down completely randomly.
Pair Corralation between Federal Agricultural and Owl Rock
If you would invest 15,637 in Federal Agricultural Mortgage on September 1, 2024 and sell it today you would earn a total of 5,710 from holding Federal Agricultural Mortgage or generate 36.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.37% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Owl Rock Capital
Performance |
| Timeline |
| Federal Agricultural |
| Owl Rock Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal Agricultural and Owl Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Owl Rock
The main advantage of trading using opposite Federal Agricultural and Owl Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural position performs unexpectedly, Owl Rock 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 Owl Rock will offset losses from the drop in Owl Rock's long position.The idea behind Federal Agricultural Mortgage and Owl Rock Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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