Correlation Between Federal Home and Groupon
Can any of the company-specific risk be diversified away by investing in both Federal Home and Groupon 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 Groupon 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 Groupon, you can compare the effects of market volatilities on Federal Home and Groupon 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 Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Groupon.
Diversification Opportunities for Federal Home and Groupon
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Groupon is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon 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 Groupon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupon has no effect on the direction of Federal Home i.e., Federal Home and Groupon go up and down completely randomly.
Pair Corralation between Federal Home and Groupon
Assuming the 90 days horizon Federal Home Loan is expected to generate 2.41 times more return on investment than Groupon. However, Federal Home is 2.41 times more volatile than Groupon. It trades about 0.28 of its potential returns per unit of risk. Groupon is currently generating about -0.01 per unit of risk. If you would invest 473.00 in Federal Home Loan on August 28, 2024 and sell it today you would earn a total of 607.00 from holding Federal Home Loan or generate 128.33% 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. Groupon
Performance |
| Timeline |
| Federal Home Loan |
| Groupon |
Federal Home and Groupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Groupon
The main advantage of trading using opposite Federal Home and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, Groupon 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 Groupon will offset losses from the drop in Groupon's 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 |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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