Correlation Between Federal Home and Fastenal
Can any of the company-specific risk be diversified away by investing in both Federal Home and Fastenal 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 Home and Fastenal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home Loan and Fastenal Company, you can compare the effects of market volatilities on Federal Home and Fastenal 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 Home with a short position of Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Fastenal.
Diversification Opportunities for Federal Home and Fastenal
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Fastenal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Federal Home 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 Home Loan are associated (or correlated) with Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Federal Home i.e., Federal Home and Fastenal go up and down completely randomly.
Pair Corralation between Federal Home and Fastenal
Assuming the 90 days horizon Federal Home Loan is expected to generate 3.81 times more return on investment than Fastenal. However, Federal Home is 3.81 times more volatile than Fastenal Company. It trades about 0.13 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.13 per unit of risk. If you would invest 133.00 in Federal Home Loan on August 31, 2024 and sell it today you would earn a total of 163.00 from holding Federal Home Loan or generate 122.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.23% |
| Values | Daily Returns |
Federal Home Loan vs. Fastenal Company
Performance |
| Timeline |
| Federal Home Loan |
| Fastenal |
Federal Home and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Fastenal
The main advantage of trading using opposite Federal Home and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| Federal Home vs. Superior Plus Corp | Federal Home vs. NMI Holdings | Federal Home vs. Origin Agritech | Federal Home vs. SIVERS SEMICONDUCTORS AB |
| Fastenal vs. WATSCO INC B | Fastenal vs. Indutrade AB | Fastenal vs. Superior Plus Corp | Fastenal 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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