Correlation Between Federated Investors and TPG

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

By analyzing existing cross correlation between Federated Investors B and TPG Inc, you can compare the effects of market volatilities on Federated Investors and TPG 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 Federated Investors with a short position of TPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Investors and TPG.

Diversification Opportunities for Federated Investors and TPG

0.76

Correlation Coefficient

Federated Investors  TPG

Poor diversification

The 3 months correlation between Federated and TPG is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Federated Investors B and TPG Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Inc and Federated Investors 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 Federated Investors B are associated (or correlated) with TPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Inc has no effect on the direction of Federated Investors i.e., Federated Investors and TPG go up and down completely randomly.

Pair Corralation between Federated Investors and TPG

Considering the 90-day investment horizon Federated Investors is expected to generate 3.03 times less return on investment than TPG. But when comparing it to its historical volatility, Federated Investors B is 1.63 times less risky than TPG. It trades about 0.06 of its potential returns per unit of risk. TPG Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,772  in TPG Inc on October 10, 2024 and sell it today you would earn a total of  2,736  from holding TPG Inc or generate 72.53% return on investment over 90 days.

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

Federated Investors B  vs.  TPG Inc

Federated Investors

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Investors B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Federated Investors may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TPG Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TPG Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TPG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Federated Investors and TPG

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

The idea behind Federated Investors B and TPG Inc 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 Global Correlations module to find global opportunities by holding instruments from different markets.