Correlation Between Safety Insurance and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Federal Agricultural.
Diversification Opportunities for Safety Insurance and Federal Agricultural
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Safety and Federal is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Federal Agricultural go up and down completely randomly.
Pair Corralation between Safety Insurance and Federal Agricultural
Assuming the 90 days horizon Safety Insurance Group is expected to under-perform the Federal Agricultural. In addition to that, Safety Insurance is 1.58 times more volatile than Federal Agricultural Mortgage. It trades about -0.11 of its total potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of volatility. If you would invest 18,800 in Federal Agricultural Mortgage on November 5, 2024 and sell it today you would earn a total of 300.00 from holding Federal Agricultural Mortgage or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safety Insurance Group vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Safety Insurance |
| Federal Agricultural |
Safety Insurance and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Federal Agricultural
The main advantage of trading using opposite Safety Insurance and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. Commercial Vehicle Group | Safety Insurance vs. Penta Ocean Construction Co | Safety Insurance vs. Daito Trust Construction | Safety Insurance vs. GEELY AUTOMOBILE |
| Federal Agricultural vs. STMICROELECTRONICS | Federal Agricultural vs. Strategic Education | Federal Agricultural vs. Methode Electronics | Federal Agricultural vs. BW OFFSHORE LTD |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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