Correlation Between Federal Home and DOCDATA

Can any of the company-specific risk be diversified away by investing in both Federal Home and DOCDATA 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 DOCDATA 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 DOCDATA, you can compare the effects of market volatilities on Federal Home and DOCDATA 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 DOCDATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and DOCDATA.

Diversification Opportunities for Federal Home and DOCDATA

-0.53

Correlation Coefficient

Federal Home  DOCDATA

Excellent diversification

The 3 months correlation between Federal and DOCDATA is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of Federal Home i.e., Federal Home and DOCDATA go up and down completely randomly.

Pair Corralation between Federal Home and DOCDATA

Assuming the 90 days horizon Federal Home Loan is expected to generate 1.81 times more return on investment than DOCDATA. However, Federal Home is 1.81 times more volatile than DOCDATA. It trades about 0.06 of its potential returns per unit of risk. DOCDATA is currently generating about 0.02 per unit of risk. If you would invest  446.00  in Federal Home Loan on April 30, 2025 and sell it today you would earn a total of  64.00  from holding Federal Home Loan or generate 14.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Federal Home Loan  vs.  DOCDATA

Federal Home Loan

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Home reported solid returns over the last few months and may actually be approaching a breakup point.

DOCDATA

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DOCDATA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, DOCDATA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Federal Home and DOCDATA

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

The idea behind Federal Home Loan and DOCDATA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.