Correlation Between Federal National and SCCB
Can any of the company-specific risk be diversified away by investing in both Federal National and SCCB 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 SCCB 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 SCCB, you can compare the effects of market volatilities on Federal National and SCCB 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 SCCB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and SCCB.
Diversification Opportunities for Federal National and SCCB
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federal and SCCB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage and SCCB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCCB 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 SCCB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCCB has no effect on the direction of Federal National i.e., Federal National and SCCB go up and down completely randomly.
Pair Corralation between Federal National and SCCB
Assuming the 90 days horizon Federal National Mortgage is expected to generate 13.19 times more return on investment than SCCB. However, Federal National is 13.19 times more volatile than SCCB. It trades about 0.08 of its potential returns per unit of risk. SCCB is currently generating about 0.07 per unit of risk. If you would invest 700,000 in Federal National Mortgage on August 31, 2024 and sell it today you would earn a total of 2,600,000 from holding Federal National Mortgage or generate 371.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.62% |
| Values | Daily Returns |
Federal National Mortgage vs. SCCB
Performance |
| Timeline |
| Federal National Mortgage |
| SCCB |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal National and SCCB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and SCCB
The main advantage of trading using opposite Federal National and SCCB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National position performs unexpectedly, SCCB 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 SCCB will offset losses from the drop in SCCB'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 |
| SCCB vs. Sachem Capital Corp | SCCB vs. Sachem Capital Corp | SCCB vs. B Riley Financial | SCCB vs. Eagle Point Credit |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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