Correlation Between Federal National and Equitrans Midstream
Can any of the company-specific risk be diversified away by investing in both Federal National and Equitrans Midstream 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 Equitrans Midstream 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 Equitrans Midstream Corp, you can compare the effects of market volatilities on Federal National and Equitrans Midstream 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 Equitrans Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Equitrans Midstream.
Diversification Opportunities for Federal National and Equitrans Midstream
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federal and Equitrans is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and Equitrans Midstream Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitrans Midstream 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 Equitrans Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitrans Midstream Corp has no effect on the direction of Federal National i.e., Federal National and Equitrans Midstream go up and down completely randomly.
Pair Corralation between Federal National and Equitrans Midstream
Assuming the 90 days horizon Federal National Mortgage is expected to generate 2.22 times more return on investment than Equitrans Midstream. However, Federal National is 2.22 times more volatile than Equitrans Midstream Corp. It trades about 0.06 of its potential returns per unit of risk. Equitrans Midstream Corp is currently generating about 0.06 per unit of risk. If you would invest 825,000 in Federal National Mortgage on August 24, 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 | 82.26% |
| Values | Daily Returns |
Federal National Mortgage vs. Equitrans Midstream Corp
Performance |
| Timeline |
| Federal National Mortgage |
| Equitrans Midstream Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal National and Equitrans Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Equitrans Midstream
The main advantage of trading using opposite Federal National and Equitrans Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, Equitrans Midstream 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 Equitrans Midstream will offset losses from the drop in Equitrans Midstream'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 |
| Equitrans Midstream vs. MPLX LP | Equitrans Midstream vs. Plains All American | Equitrans Midstream vs. Hess Midstream Partners | Equitrans Midstream vs. Plains GP Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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