Correlation Between Nasdaq and Federal National
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Federal National Mortgage, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Federal National.
Diversification Opportunities for Nasdaq and Federal National
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq and Federal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc 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 Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Federal National go up and down completely randomly.
Pair Corralation between Nasdaq and Federal National
Given the investment horizon of 90 days Nasdaq is expected to generate 4.84 times less return on investment than Federal National. But when comparing it to its historical volatility, Nasdaq Inc is 8.04 times less risky than Federal National. It trades about 0.17 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 305.00 in Federal National Mortgage on September 1, 2024 and sell it today you would earn a total of 1,076 from holding Federal National Mortgage or generate 352.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Federal National Mortgage
Performance |
| Timeline |
| Nasdaq Inc |
| Federal National Mortgage |
Nasdaq and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Federal National
The main advantage of trading using opposite Nasdaq and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.The idea behind Nasdaq Inc and Federal National Mortgage pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Federal National vs. Federal National Mortgage | Federal National vs. HUMANA INC | Federal National vs. SCOR PK | Federal National vs. Aquagold International |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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