Correlation Between Federal Home and ABN AMRO

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

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

Diversification Opportunities for Federal Home and ABN AMRO

0.84

Correlation Coefficient

Federal Home  ABN AMRO

Very poor diversification

The 3 months correlation between Federal and ABN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and ABN AMRO Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABN AMRO Bank and Federal Home 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 Home Loan are associated (or correlated) with ABN AMRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABN AMRO Bank has no effect on the direction of Federal Home i.e., Federal Home and ABN AMRO go up and down completely randomly.

Pair Corralation between Federal Home and ABN AMRO

Assuming the 90 days horizon Federal Home Loan is expected to generate 3.87 times more return on investment than ABN AMRO. However, Federal Home is 3.87 times more volatile than ABN AMRO Bank. It trades about 0.1 of its potential returns per unit of risk. ABN AMRO Bank is currently generating about 0.34 per unit of risk. If you would invest  458.00  in Federal Home Loan on April 24, 2025 and sell it today you would earn a total of  132.00  from holding Federal Home Loan or generate 28.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Federal Home Loan  vs.  ABN AMRO Bank

Federal Home Loan

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

ABN AMRO Bank

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ABN AMRO Bank are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ABN AMRO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federal Home and ABN AMRO

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

The idea behind Federal Home Loan and ABN AMRO Bank 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.