Correlation Between Barings BDC and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Barings BDC and Federal Agricultural 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 Barings BDC and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings BDC and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Barings BDC and Federal Agricultural 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 Barings BDC with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings BDC and Federal Agricultural.
Diversification Opportunities for Barings BDC and Federal Agricultural
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Barings and Federal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Barings BDC 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 Barings BDC are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Barings BDC i.e., Barings BDC and Federal Agricultural go up and down completely randomly.
Pair Corralation between Barings BDC and Federal Agricultural
Given the investment horizon of 90 days Barings BDC is expected to generate 3.01 times less return on investment than Federal Agricultural. But when comparing it to its historical volatility, Barings BDC is 2.14 times less risky than Federal Agricultural. It trades about 0.11 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 17,961 in Federal Agricultural Mortgage on August 26, 2024 and sell it today you would earn a total of 2,548 from holding Federal Agricultural Mortgage or generate 14.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings BDC vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Barings BDC |
| Federal Agricultural |
Barings BDC and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings BDC and Federal Agricultural
The main advantage of trading using opposite Barings BDC and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Barings BDC vs. PowerUp Acquisition Corp | Barings BDC vs. Aurora Innovation | Barings BDC vs. HUMANA INC | Barings BDC vs. Aquagold International |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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