Correlation Between Snowflake and Federal Natl

Can any of the company-specific risk be diversified away by investing in both Snowflake and Federal Natl 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 Snowflake and Federal Natl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Snowflake and Federal Natl Mtg, you can compare the effects of market volatilities on Snowflake and Federal Natl 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 Snowflake with a short position of Federal Natl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Federal Natl.

Diversification Opportunities for Snowflake and Federal Natl

0.76

Correlation Coefficient

Snowflake  Federal Natl

Poor diversification

The 3 months correlation between Snowflake and Federal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Federal Natl Mtg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Natl Mtg and Snowflake 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 Snowflake are associated (or correlated) with Federal Natl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Natl Mtg has no effect on the direction of Snowflake i.e., Snowflake and Federal Natl go up and down completely randomly.

Pair Corralation between Snowflake and Federal Natl

Given the investment horizon of 90 days Snowflake is expected to generate 1.95 times less return on investment than Federal Natl. But when comparing it to its historical volatility, Snowflake is 1.98 times less risky than Federal Natl. It trades about 0.31 of its potential returns per unit of risk. Federal Natl Mtg is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Federal Natl Mtg on September 1, 2024 and sell it today you would earn a total of  480.00  from holding Federal Natl Mtg or generate 128.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.3%
Values	Daily Returns

Snowflake  vs.  Federal Natl Mtg

Snowflake

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snowflake are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Snowflake showed solid returns over the last few months and may actually be approaching a breakup point.

Federal Natl Mtg

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Natl Mtg are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly sluggish basic indicators, Federal Natl demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snowflake and Federal Natl

The main advantage of trading using opposite Snowflake and Federal Natl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake position performs unexpectedly, Federal Natl 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 Natl will offset losses from the drop in Federal Natl's long position.

The idea behind Snowflake and Federal Natl Mtg 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.