Correlation Between Federal National and Lithium One
Can any of the company-specific risk be diversified away by investing in both Federal National and Lithium One 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 National and Lithium One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal National Mortgage and Lithium One Metals, you can compare the effects of market volatilities on Federal National and Lithium One 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 National with a short position of Lithium One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Lithium One.
Diversification Opportunities for Federal National and Lithium One
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federal and Lithium is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Lithium One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium One Metals and Federal National 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 National Mortgage are associated (or correlated) with Lithium One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium One Metals has no effect on the direction of Federal National i.e., Federal National and Lithium One go up and down completely randomly.
Pair Corralation between Federal National and Lithium One
Given the investment horizon of 90 days Federal National is expected to generate 4.68 times less return on investment than Lithium One. But when comparing it to its historical volatility, Federal National Mortgage is 6.58 times less risky than Lithium One. It trades about 0.14 of its potential returns per unit of risk. Lithium One Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1.85 in Lithium One Metals on November 28, 2024 and sell it today you would lose (0.73) from holding Lithium One Metals or give up 39.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federal National Mortgage vs. Lithium One Metals
Performance |
| Timeline |
| Federal National Mortgage |
| Lithium One Metals |
Federal National and Lithium One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Lithium One
The main advantage of trading using opposite Federal National and Lithium One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Lithium One 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 Lithium One will offset losses from the drop in Lithium One's long position.| Federal National vs. nLIGHT Inc | Federal National vs. KLA Tencor | Federal National vs. John B Sanfilippo | Federal National vs. Analog Devices |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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