Correlation Between Federal Home and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Federal Home and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Federal Home and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Dow Jones.
Diversification Opportunities for Federal Home and Dow Jones
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Dow is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Federal Home i.e., Federal Home and Dow Jones go up and down completely randomly.
Pair Corralation between Federal Home and Dow Jones
Assuming the 90 days horizon Federal Home Loan is expected to generate 6.2 times more return on investment than Dow Jones. However, Federal Home is 6.2 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 340.00 in Federal Home Loan on August 29, 2024 and sell it today you would earn a total of 1,200 from holding Federal Home Loan or generate 352.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home Loan vs. Dow Jones Industrial
Performance |
| Timeline |
Federal Home and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Federal Home Loan
Pair trading matchups for Federal Home
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Federal Home and Dow Jones
The main advantage of trading using opposite Federal Home and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage | Federal Home vs. Federal National Mortgage |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |