Correlation Between Federal National and IGO
Can any of the company-specific risk be diversified away by investing in both Federal National and IGO 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 IGO 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 IGO Limited, you can compare the effects of market volatilities on Federal National and IGO 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 IGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and IGO.
Diversification Opportunities for Federal National and IGO
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federal and IGO is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and IGO Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGO Limited 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 IGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGO Limited has no effect on the direction of Federal National i.e., Federal National and IGO go up and down completely randomly.
Pair Corralation between Federal National and IGO
Assuming the 90 days horizon Federal National Mortgage is expected to generate 1.29 times more return on investment than IGO. However, Federal National is 1.29 times more volatile than IGO Limited. It trades about 0.07 of its potential returns per unit of risk. IGO Limited is currently generating about 0.02 per unit of risk. If you would invest 1,250,000 in Federal National Mortgage on August 29, 2024 and sell it today you would earn a total of 1,280,000 from holding Federal National Mortgage or generate 102.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.56% |
| Values | Daily Returns |
Federal National Mortgage vs. IGO Limited
Performance |
| Timeline |
| Federal National Mortgage |
| IGO Limited |
Federal National and IGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and IGO
The main advantage of trading using opposite Federal National and IGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, IGO 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 IGO will offset losses from the drop in IGO'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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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