Correlation Between Federal Home and Loandepot
Can any of the company-specific risk be diversified away by investing in both Federal Home and Loandepot 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 Loandepot 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 Loandepot, you can compare the effects of market volatilities on Federal Home and Loandepot 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 Loandepot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Loandepot.
Diversification Opportunities for Federal Home and Loandepot
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federal and Loandepot is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot 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 Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of Federal Home i.e., Federal Home and Loandepot go up and down completely randomly.
Pair Corralation between Federal Home and Loandepot
Given the investment horizon of 90 days Federal Home Loan is expected to generate 1.14 times more return on investment than Loandepot. However, Federal Home is 1.14 times more volatile than Loandepot. It trades about 0.13 of its potential returns per unit of risk. Loandepot is currently generating about 0.06 per unit of risk. If you would invest 137.00 in Federal Home Loan on August 25, 2024 and sell it today you would earn a total of 173.00 from holding Federal Home Loan or generate 126.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home Loan vs. Loandepot
Performance |
| Timeline |
| Federal Home Loan |
| Loandepot |
Federal Home and Loandepot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Loandepot
The main advantage of trading using opposite Federal Home and Loandepot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, Loandepot 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 Loandepot will offset losses from the drop in Loandepot's long position.| Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. American International Group | Federal Home vs. Groupon |
| Loandepot vs. Encore Capital Group | Loandepot vs. Federal Home Loan | Loandepot vs. CNFinance Holdings | Loandepot vs. Greystone Housing Impact |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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