Correlation Between International Stock and Federated High

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

By analyzing existing cross correlation between International Stock Fund and Federated High Yield, you can compare the effects of market volatilities on International Stock and Federated High 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 International Stock with a short position of Federated High. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Stock and Federated High.

Diversification Opportunities for International Stock and Federated High

0.84

Correlation Coefficient

International Stock  Federated High

Very poor diversification

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

Pair Corralation between International Stock and Federated High

Assuming the 90 days horizon International Stock Fund is expected to generate 3.8 times more return on investment than Federated High. However, International Stock is 3.8 times more volatile than Federated High Yield. It trades about 0.03 of its potential returns per unit of risk. Federated High Yield is currently generating about 0.09 per unit of risk. If you would invest  2,268  in International Stock Fund on December 25, 2024 and sell it today you would earn a total of  34.00  from holding International Stock Fund or generate 1.5% return on investment over 90 days.

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

International Stock Fund  vs.  Federated High Yield

International Stock

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Stock Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, International Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Stock and Federated High

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

The idea behind International Stock Fund and Federated High Yield 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.