Correlation Between Shelton Emerging and Federated Short

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Can any of the company-specific risk be diversified away by investing in both Shelton Emerging and Federated Short 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 Shelton Emerging and Federated Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shelton Emerging Markets and Federated Short Term Income, you can compare the effects of market volatilities on Shelton Emerging and Federated Short 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 Shelton Emerging with a short position of Federated Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shelton Emerging and Federated Short.

Diversification Opportunities for Shelton Emerging and Federated Short

SheltonFederatedDiversified AwaySheltonFederatedDiversified Away100%
0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Shelton and Federated is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shelton Emerging Markets and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Shelton Emerging 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 Shelton Emerging Markets are associated (or correlated) with Federated Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Shelton Emerging i.e., Shelton Emerging and Federated Short go up and down completely randomly.

Pair Corralation between Shelton Emerging and Federated Short

Assuming the 90 days horizon Shelton Emerging Markets is expected to under-perform the Federated Short. In addition to that, Shelton Emerging is 8.95 times more volatile than Federated Short Term Income. It trades about -0.19 of its total potential returns per unit of risk. Federated Short Term Income is currently generating about -0.02 per unit of volatility. If you would invest  848.00  in Federated Short Term Income on October 9, 2024 and sell it today you would lose (1.00) from holding Federated Short Term Income or give up 0.12% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Shelton Emerging Markets  vs.  Federated Short Term Income

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -8-6-4-202
JavaScript chart by amCharts 3.21.15EMSLX FSTYX
       Timeline  
Shelton Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shelton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan16.51717.51818.5
Federated Short Term 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Federated Short Term Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan8.458.468.478.488.498.58.51

Shelton Emerging and Federated Short Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.93-1.49-1.05-0.61-0.170.170.611.051.491.93 51015202530
JavaScript chart by amCharts 3.21.15EMSLX FSTYX
       Returns  

Pair Trading with Shelton Emerging and Federated Short

The main advantage of trading using opposite Shelton Emerging and Federated Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shelton Emerging position performs unexpectedly, Federated Short 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 Short will offset losses from the drop in Federated Short's long position.
The idea behind Shelton Emerging Markets and Federated Short Term Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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