Correlation Between Federal National and Aristocrat Group
Can any of the company-specific risk be diversified away by investing in both Federal National and Aristocrat Group 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 Aristocrat Group 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 Aristocrat Group Corp, you can compare the effects of market volatilities on Federal National and Aristocrat Group 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 Aristocrat Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Aristocrat Group.
Diversification Opportunities for Federal National and Aristocrat Group
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Aristocrat is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Aristocrat Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Group Corp 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 Aristocrat Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Group Corp has no effect on the direction of Federal National i.e., Federal National and Aristocrat Group go up and down completely randomly.
Pair Corralation between Federal National and Aristocrat Group
Assuming the 90 days horizon Federal National Mortgage is expected to generate 5.69 times more return on investment than Aristocrat Group. However, Federal National is 5.69 times more volatile than Aristocrat Group Corp. It trades about 0.27 of its potential returns per unit of risk. Aristocrat Group Corp is currently generating about 0.04 per unit of risk. If you would invest 1,300,000 in Federal National Mortgage on September 4, 2024 and sell it today you would earn a total of 2,000,000 from holding Federal National Mortgage or generate 153.85% 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. Aristocrat Group Corp
Performance |
| Timeline |
| Federal National Mortgage |
| Aristocrat Group Corp |
Federal National and Aristocrat Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Aristocrat Group
The main advantage of trading using opposite Federal National and Aristocrat Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Aristocrat Group 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 Aristocrat Group will offset losses from the drop in Aristocrat Group'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 |
| Aristocrat Group vs. Federal National Mortgage | Aristocrat Group vs. Shinhan Financial Group | Aristocrat Group vs. Woori Financial Group | Aristocrat Group vs. Grupo Aval |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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