Correlation Between First State and Federal National
Can any of the company-specific risk be diversified away by investing in both First State and Federal National 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 First State and Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First State Financial and Federal National Mortgage, you can compare the effects of market volatilities on First State and Federal National 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 First State with a short position of Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First State and Federal National.
Diversification Opportunities for First State and Federal National
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Federal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and First State 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 First State Financial are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of First State i.e., First State and Federal National go up and down completely randomly.
Pair Corralation between First State and Federal National
If you would invest 730.00 in Federal National Mortgage on August 25, 2024 and sell it today you would earn a total of 830.00 from holding Federal National Mortgage or generate 113.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.55% |
| Values | Daily Returns |
First State Financial vs. Federal National Mortgage
Performance |
| Timeline |
| First State Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Federal National Mortgage |
First State and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First State and Federal National
The main advantage of trading using opposite First State and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First State position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.| First State vs. First Interstate BancSystem | First State vs. First Financial Bankshares | First State vs. Independent Bank Group | First State vs. CVB Financial |
| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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