Correlation Between Federal Home and McPhy Energy
Can any of the company-specific risk be diversified away by investing in both Federal Home and McPhy Energy 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 McPhy Energy 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 McPhy Energy SA, you can compare the effects of market volatilities on Federal Home and McPhy Energy 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 McPhy Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and McPhy Energy.
Diversification Opportunities for Federal Home and McPhy Energy
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Federal and McPhy is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and McPhy Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McPhy Energy SA 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 McPhy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McPhy Energy SA has no effect on the direction of Federal Home i.e., Federal Home and McPhy Energy go up and down completely randomly.
Pair Corralation between Federal Home and McPhy Energy
Assuming the 90 days horizon Federal Home Loan is expected to generate 1.6 times more return on investment than McPhy Energy. However, Federal Home is 1.6 times more volatile than McPhy Energy SA. It trades about 0.13 of its potential returns per unit of risk. McPhy Energy SA is currently generating about -0.19 per unit of risk. If you would invest 131.00 in Federal Home Loan on September 3, 2024 and sell it today you would earn a total of 167.00 from holding Federal Home Loan or generate 127.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home Loan vs. McPhy Energy SA
Performance |
| Timeline |
| Federal Home Loan |
| McPhy Energy SA |
Federal Home and McPhy Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and McPhy Energy
The main advantage of trading using opposite Federal Home and McPhy Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, McPhy Energy 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 McPhy Energy will offset losses from the drop in McPhy Energy's long position.| Federal Home vs. Cardinal Health | Federal Home vs. Waste Management | Federal Home vs. DOCDATA | Federal Home vs. EPSILON HEALTHCARE LTD |
| McPhy Energy vs. MEDICAL FACILITIES NEW | McPhy Energy vs. Computershare Limited | McPhy Energy vs. Consolidated Communications Holdings | McPhy Energy vs. INTERSHOP Communications Aktiengesellschaft |
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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