Correlation Between Artisan Select and Federated Ultrashort

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

By analyzing existing cross correlation between Artisan Select Equity and Federated Ultrashort Bond, you can compare the effects of market volatilities on Artisan Select and Federated Ultrashort 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 Artisan Select with a short position of Federated Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Select and Federated Ultrashort.

Diversification Opportunities for Artisan Select and Federated Ultrashort

0.46

Correlation Coefficient

Artisan Select  Federated Ultrashort

Very weak diversification

The 3 months correlation between Artisan and Federated is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Select Equity and Federated Ultrashort Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Ultrashort Bond and Artisan Select 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 Artisan Select Equity are associated (or correlated) with Federated Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Ultrashort Bond has no effect on the direction of Artisan Select i.e., Artisan Select and Federated Ultrashort go up and down completely randomly.

Pair Corralation between Artisan Select and Federated Ultrashort

Assuming the 90 days horizon Artisan Select Equity is expected to under-perform the Federated Ultrashort. In addition to that, Artisan Select is 18.7 times more volatile than Federated Ultrashort Bond. It trades about -0.29 of its total potential returns per unit of risk. Federated Ultrashort Bond is currently generating about -0.13 per unit of volatility. If you would invest  929.00  in Federated Ultrashort Bond on October 8, 2024 and sell it today you would lose (1.00) from holding Federated Ultrashort Bond or give up 0.11% of portfolio value over 90 days.

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

Artisan Select Equity  vs.  Federated Ultrashort Bond

Artisan Select Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Select Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Artisan Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Ultrashort Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Ultrashort Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Federated Ultrashort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artisan Select and Federated Ultrashort

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

The idea behind Artisan Select Equity and Federated Ultrashort Bond 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.