Correlation Between Federal National and YTLBerhad
Can any of the company-specific risk be diversified away by investing in both Federal National and YTLBerhad 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 YTLBerhad 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 YTL Berhad, you can compare the effects of market volatilities on Federal National and YTLBerhad 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 YTLBerhad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and YTLBerhad.
Diversification Opportunities for Federal National and YTLBerhad
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federal and YTLBerhad is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and YTL Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YTL Berhad 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 YTLBerhad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YTL Berhad has no effect on the direction of Federal National i.e., Federal National and YTLBerhad go up and down completely randomly.
Pair Corralation between Federal National and YTLBerhad
Given the investment horizon of 90 days Federal National Mortgage is expected to generate 4.04 times more return on investment than YTLBerhad. However, Federal National is 4.04 times more volatile than YTL Berhad. It trades about 0.39 of its potential returns per unit of risk. YTL Berhad is currently generating about 0.21 per unit of risk. If you would invest 147.00 in Federal National Mortgage on August 29, 2024 and sell it today you would earn a total of 184.00 from holding Federal National Mortgage or generate 125.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal National Mortgage vs. YTL Berhad
Performance |
| Timeline |
| Federal National Mortgage |
| YTL Berhad |
Federal National and YTLBerhad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and YTLBerhad
The main advantage of trading using opposite Federal National and YTLBerhad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, YTLBerhad 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 YTLBerhad will offset losses from the drop in YTLBerhad's long position.| Federal National vs. American International Group | Federal National vs. Groupon | Federal National vs. HUMANA INC | Federal National vs. Aquagold International |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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