Correlation Between Federal Home and Universal
Can any of the company-specific risk be diversified away by investing in both Federal Home and Universal 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 Home and Universal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home 530 and Universal, you can compare the effects of market volatilities on Federal Home and Universal 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 Home with a short position of Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Universal.
Diversification Opportunities for Federal Home and Universal
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Universal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home 530 and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Federal Home 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 Home 530 are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Federal Home i.e., Federal Home and Universal go up and down completely randomly.
Pair Corralation between Federal Home and Universal
Assuming the 90 days horizon Federal Home 530 is expected to generate 0.84 times more return on investment than Universal. However, Federal Home 530 is 1.19 times less risky than Universal. It trades about 0.62 of its potential returns per unit of risk. Universal is currently generating about -0.31 per unit of risk. If you would invest 1,603 in Federal Home 530 on October 9, 2024 and sell it today you would earn a total of 196.00 from holding Federal Home 530 or generate 12.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home 530 vs. Universal
Performance |
| Timeline |
| Federal Home 530 |
| Universal |
Federal Home and Universal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and Universal
The main advantage of trading using opposite Federal Home and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, Universal 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 Universal will offset losses from the drop in Universal's long position.| Federal Home vs. Grupo Simec SAB | Federal Home vs. Nippon Steel Corp | Federal Home vs. Corning Incorporated | Federal Home vs. Kaiser Aluminum |
| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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