Correlation Between NYSE Composite and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Federal Agricultural 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 NYSE Composite and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Federal Agricultural Mortgage, you can compare the effects of market volatilities on NYSE Composite and Federal Agricultural 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 NYSE Composite with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Federal Agricultural.
Diversification Opportunities for NYSE Composite and Federal Agricultural
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Federal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and NYSE Composite 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 NYSE Composite are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of NYSE Composite i.e., NYSE Composite and Federal Agricultural go up and down completely randomly.
Pair Corralation between NYSE Composite and Federal Agricultural
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.73 times more return on investment than Federal Agricultural. However, NYSE Composite is 1.36 times less risky than Federal Agricultural. It trades about 0.13 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about -0.15 per unit of risk. If you would invest 1,959,424 in NYSE Composite on August 24, 2024 and sell it today you would earn a total of 37,406 from holding NYSE Composite or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Federal Agricultural Mortgage
Performance |
| Timeline |
NYSE Composite and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Federal Agricultural Mortgage
Pair trading matchups for Federal Agricultural
Pair Trading with NYSE Composite and Federal Agricultural
The main advantage of trading using opposite NYSE Composite and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Federal Agricultural 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 Agricultural will offset losses from the drop in Federal Agricultural's long position.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Citizens Financial Group | Federal Agricultural vs. Wells Fargo |
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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