Correlation Between SLM Corp and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both SLM Corp 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 SLM Corp and Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SLM Corp and Federal Agricultural Mortgage, you can compare the effects of market volatilities on SLM Corp 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 SLM Corp with a short position of Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of SLM Corp and Federal Agricultural.
Diversification Opportunities for SLM Corp and Federal Agricultural
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SLM and Federal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and SLM Corp 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 SLM Corp 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 SLM Corp i.e., SLM Corp and Federal Agricultural go up and down completely randomly.
Pair Corralation between SLM Corp and Federal Agricultural
Considering the 90-day investment horizon SLM Corp is expected to generate 1.06 times less return on investment than Federal Agricultural. In addition to that, SLM Corp is 1.1 times more volatile than Federal Agricultural Mortgage. It trades about 0.06 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 11,467 in Federal Agricultural Mortgage on August 27, 2024 and sell it today you would earn a total of 9,042 from holding Federal Agricultural Mortgage or generate 78.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SLM Corp vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| SLM Corp |
| Federal Agricultural |
SLM Corp and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SLM Corp and Federal Agricultural
The main advantage of trading using opposite SLM Corp and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLM Corp 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.| SLM Corp vs. Orix Corp Ads | SLM Corp vs. FirstCash | SLM Corp vs. Medallion Financial Corp | SLM Corp vs. Oportun Financial Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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