Correlation Between Federal National and Federal Natl
Can any of the company-specific risk be diversified away by investing in both Federal National and Federal Natl 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 Federal Natl 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 Federal Natl Pfd, you can compare the effects of market volatilities on Federal National and Federal Natl 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 Federal Natl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Federal Natl.
Diversification Opportunities for Federal National and Federal Natl
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Federal and Federal is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Federal Natl Pfd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Natl Pfd 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 Federal Natl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Natl Pfd has no effect on the direction of Federal National i.e., Federal National and Federal Natl go up and down completely randomly.
Pair Corralation between Federal National and Federal Natl
Assuming the 90 days horizon Federal National Mortgage is expected to generate 0.97 times more return on investment than Federal Natl. However, Federal National Mortgage is 1.03 times less risky than Federal Natl. It trades about 0.3 of its potential returns per unit of risk. Federal Natl Pfd is currently generating about 0.29 per unit of risk. If you would invest 723.00 in Federal National Mortgage on September 1, 2024 and sell it today you would earn a total of 927.00 from holding Federal National Mortgage or generate 128.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal National Mortgage vs. Federal Natl Pfd
Performance |
| Timeline |
| Federal National Mortgage |
| Federal Natl Pfd |
Federal National and Federal Natl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Federal Natl
The main advantage of trading using opposite Federal National and Federal Natl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Federal Natl 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 Federal Natl will offset losses from the drop in Federal Natl's long position.| Federal National vs. Federal National Mortgage | Federal National vs. HUMANA INC | Federal National vs. SCOR PK | Federal National vs. Aquagold International |
| Federal Natl vs. Federal National Mortgage | Federal Natl vs. Federal National Mortgage | Federal Natl vs. Federal National Mortgage | Federal Natl vs. Federal Home Loan |
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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