Correlation Between Far East and Federal Home
Can any of the company-specific risk be diversified away by investing in both Far East and Federal Home 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 Far East and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far East Horizon and Federal Home Loan, you can compare the effects of market volatilities on Far East and Federal Home 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 Far East with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far East and Federal Home.
Diversification Opportunities for Far East and Federal Home
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Far and Federal is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Far East Horizon and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Far East 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 Far East Horizon are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Far East i.e., Far East and Federal Home go up and down completely randomly.
Pair Corralation between Far East and Federal Home
Assuming the 90 days horizon Far East Horizon is expected to generate 0.39 times more return on investment than Federal Home. However, Far East Horizon is 2.59 times less risky than Federal Home. It trades about 0.26 of its potential returns per unit of risk. Federal Home Loan is currently generating about -0.15 per unit of risk. If you would invest 55.00 in Far East Horizon on September 24, 2024 and sell it today you would earn a total of 8.00 from holding Far East Horizon or generate 14.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Far East Horizon vs. Federal Home Loan
Performance |
| Timeline |
| Far East Horizon |
| Federal Home Loan |
Far East and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far East and Federal Home
The main advantage of trading using opposite Far East and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far East position performs unexpectedly, Federal Home 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 Home will offset losses from the drop in Federal Home's long position.| Far East vs. Walker Dunlop | Far East vs. Paragon Banking Group | Far East vs. Hercules Capital | Far East vs. DIVERSIFIED ROYALTY |
| Federal Home vs. Far East Horizon | Federal Home vs. Walker Dunlop | Federal Home vs. Paragon Banking Group | Federal Home vs. Hercules Capital |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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