Correlation Between Federal National and Alpha Lithium
Can any of the company-specific risk be diversified away by investing in both Federal National and Alpha Lithium 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 Alpha Lithium 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 Alpha Lithium, you can compare the effects of market volatilities on Federal National and Alpha Lithium 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 Alpha Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Alpha Lithium.
Diversification Opportunities for Federal National and Alpha Lithium
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Alpha is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Alpha Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Lithium 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 Alpha Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Lithium has no effect on the direction of Federal National i.e., Federal National and Alpha Lithium go up and down completely randomly.
Pair Corralation between Federal National and Alpha Lithium
Assuming the 90 days horizon Federal National Mortgage is expected to generate 2.38 times more return on investment than Alpha Lithium. However, Federal National is 2.38 times more volatile than Alpha Lithium. It trades about 0.17 of its potential returns per unit of risk. Alpha Lithium is currently generating about -0.17 per unit of risk. If you would invest 1,599,500 in Federal National Mortgage on August 26, 2024 and sell it today you would earn a total of 930,500 from holding Federal National Mortgage or generate 58.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal National Mortgage vs. Alpha Lithium
Performance |
| Timeline |
| Federal National Mortgage |
| Alpha Lithium |
Federal National and Alpha Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Alpha Lithium
The main advantage of trading using opposite Federal National and Alpha Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Alpha Lithium 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 Alpha Lithium will offset losses from the drop in Alpha Lithium's long position.| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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