Correlation Between Fulcrum Diversified and Federated Strategic

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Federated Strategic Value, you can compare the effects of market volatilities on Fulcrum Diversified and Federated Strategic 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 Fulcrum Diversified with a short position of Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Federated Strategic.

Diversification Opportunities for Fulcrum Diversified and Federated Strategic

0.71

Correlation Coefficient

Fulcrum Diversified  Federated Strategic

Poor diversification

The 3 months correlation between Fulcrum and Federated is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Federated Strategic go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Federated Strategic

Assuming the 90 days horizon Fulcrum Diversified is expected to generate 1.25 times less return on investment than Federated Strategic. But when comparing it to its historical volatility, Fulcrum Diversified Absolute is 2.07 times less risky than Federated Strategic. It trades about 0.04 of its potential returns per unit of risk. Federated Strategic Value is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  559.00  in Federated Strategic Value on October 24, 2024 and sell it today you would earn a total of  49.00  from holding Federated Strategic Value or generate 8.77% return on investment over 90 days.

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

Fulcrum Diversified Absolute  vs.  Federated Strategic Value

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Federated Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fulcrum Diversified and Federated Strategic

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

The idea behind Fulcrum Diversified Absolute and Federated Strategic Value 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.