Correlation Between Equinix and Federal Home

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Can any of the company-specific risk be diversified away by investing in both Equinix and Federal Home 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 Equinix and Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinix and Federal Home Loan, you can compare the effects of market volatilities on Equinix and Federal Home 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 Equinix with a short position of Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinix and Federal Home.

Diversification Opportunities for Equinix and Federal Home

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Equinix and Federal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan and Equinix 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 Equinix are associated (or correlated) with Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Equinix i.e., Equinix and Federal Home go up and down completely randomly.

Pair Corralation between Equinix and Federal Home

Given the investment horizon of 90 days Equinix is expected to under-perform the Federal Home. But the stock apears to be less risky and, when comparing its historical volatility, Equinix is 1.71 times less risky than Federal Home. The stock trades about -0.2 of its potential returns per unit of risk. The Federal Home Loan is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  531.00  in Federal Home Loan on December 29, 2023 and sell it today you would earn a total of  79.00  from holding Federal Home Loan or generate 14.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Equinix  vs.  Federal Home Loan

 Performance 
       Timeline  
Equinix 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Equinix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Federal Home Loan 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Federal Home unveiled solid returns over the last few months and may actually be approaching a breakup point.

Equinix and Federal Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equinix and Federal Home

The main advantage of trading using opposite Equinix and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix position performs unexpectedly, Federal Home 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 Home will offset losses from the drop in Federal Home's long position.
The idea behind Equinix and Federal Home Loan 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.
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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