Correlation Between Herzfeld Caribbean and Federated Premier

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

By analyzing existing cross correlation between Herzfeld Caribbean Basin and Federated Premier Municipal, you can compare the effects of market volatilities on Herzfeld Caribbean and Federated Premier 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 Herzfeld Caribbean with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Federated Premier.

Diversification Opportunities for Herzfeld Caribbean and Federated Premier

-0.84

Correlation Coefficient

Herzfeld Caribbean  Federated Premier

Pay attention - limited upside

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

Pair Corralation between Herzfeld Caribbean and Federated Premier

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to under-perform the Federated Premier. In addition to that, Herzfeld Caribbean is 2.46 times more volatile than Federated Premier Municipal. It trades about -0.02 of its total potential returns per unit of risk. Federated Premier Municipal is currently generating about 0.04 per unit of volatility. If you would invest  974.00  in Federated Premier Municipal on September 23, 2024 and sell it today you would earn a total of  121.00  from holding Federated Premier Municipal or generate 12.42% return on investment over 90 days.

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

Herzfeld Caribbean Basin  vs.  Federated Premier Municipal

Herzfeld Caribbean Basin

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Herzfeld Caribbean and Federated Premier

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

The idea behind Herzfeld Caribbean Basin and Federated Premier Municipal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.