Correlation Between Federal National and Erin Ventures
Can any of the company-specific risk be diversified away by investing in both Federal National and Erin Ventures 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 Erin Ventures 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 Erin Ventures, you can compare the effects of market volatilities on Federal National and Erin Ventures 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 Erin Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Erin Ventures.
Diversification Opportunities for Federal National and Erin Ventures
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Erin is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Erin Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erin Ventures 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 Erin Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erin Ventures has no effect on the direction of Federal National i.e., Federal National and Erin Ventures go up and down completely randomly.
Pair Corralation between Federal National and Erin Ventures
Assuming the 90 days horizon Federal National Mortgage is expected to generate 0.66 times more return on investment than Erin Ventures. However, Federal National Mortgage is 1.52 times less risky than Erin Ventures. It trades about 0.07 of its potential returns per unit of risk. Erin Ventures is currently generating about 0.05 per unit of risk. If you would invest 700,000 in Federal National Mortgage on September 12, 2024 and sell it today you would earn a total of 2,520,000 from holding Federal National Mortgage or generate 360.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal National Mortgage vs. Erin Ventures
Performance |
| Timeline |
| Federal National Mortgage |
| Erin Ventures |
Federal National and Erin Ventures Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Erin Ventures
The main advantage of trading using opposite Federal National and Erin Ventures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Erin Ventures 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 Erin Ventures will offset losses from the drop in Erin Ventures' 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 CEOs Directory module to screen CEOs from public companies around the world.
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