Correlation Between Federal Agricultural and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between Federal Agricultural Mortgage and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on Federal Agricultural and ESSILORLUXOTTICA 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 Federal Agricultural with a short position of ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and ESSILORLUXOTTICA.

Diversification Opportunities for Federal Agricultural and ESSILORLUXOTTICA

-0.17

Correlation Coefficient

Federal Agricultural  ESSILORLUXOTTICA

Good diversification

The 3 months correlation between Federal and ESSILORLUXOTTICA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON and Federal Agricultural 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 Federal Agricultural Mortgage are associated (or correlated) with ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of Federal Agricultural i.e., Federal Agricultural and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between Federal Agricultural and ESSILORLUXOTTICA

Assuming the 90 days trading horizon Federal Agricultural Mortgage is expected to under-perform the ESSILORLUXOTTICA. But the stock apears to be less risky and, when comparing its historical volatility, Federal Agricultural Mortgage is 1.01 times less risky than ESSILORLUXOTTICA. The stock trades about -0.01 of its potential returns per unit of risk. The ESSILORLUXOTTICA 12ON is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,487  in ESSILORLUXOTTICA 12ON on April 23, 2025 and sell it today you would lose (87.00) from holding ESSILORLUXOTTICA 12ON or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Federal Agricultural Mortgage  vs.  ESSILORLUXOTTICA 12ON

Federal Agricultural

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Agricultural Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Federal Agricultural is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESSILORLUXOTTICA 12ON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, ESSILORLUXOTTICA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Federal Agricultural and ESSILORLUXOTTICA

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

The idea behind Federal Agricultural Mortgage and ESSILORLUXOTTICA 12ON 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 Stocks Directory module to find actively traded stocks across global markets.