Correlation Between Federal National and European Metals
Can any of the company-specific risk be diversified away by investing in both Federal National and European Metals 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 European Metals 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 European Metals Holdings, you can compare the effects of market volatilities on Federal National and European Metals 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and European Metals.
Diversification Opportunities for Federal National and European Metals
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and European is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Federal National i.e., Federal National and European Metals go up and down completely randomly.
Pair Corralation between Federal National and European Metals
Assuming the 90 days horizon Federal National Mortgage is expected to generate 0.9 times more return on investment than European Metals. However, Federal National Mortgage is 1.12 times less risky than European Metals. It trades about 0.06 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.01 per unit of risk. If you would invest 825,000 in Federal National Mortgage on August 29, 2024 and sell it today you would earn a total of 1,705,000 from holding Federal National Mortgage or generate 206.67% 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. European Metals Holdings
Performance |
| Timeline |
| Federal National Mortgage |
| European Metals Holdings |
Federal National and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and European Metals
The main advantage of trading using opposite Federal National and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, European Metals 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 European Metals will offset losses from the drop in European Metals' 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 |
| European Metals vs. Aurelia Metals Limited | European Metals vs. Centaurus Metals Limited | European Metals vs. Artemis Resources | European Metals vs. Ascendant Resources |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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