Correlation Between Federated High and Old Westbury

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

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

Diversification Opportunities for Federated High and Old Westbury

0.63

Correlation Coefficient

Federated High  Old Westbury

Poor diversification

The 3 months correlation between Federated and Old is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Old Westbury Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Short and Federated High 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 High Yield are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Short has no effect on the direction of Federated High i.e., Federated High and Old Westbury go up and down completely randomly.

Pair Corralation between Federated High and Old Westbury

Assuming the 90 days horizon Federated High Yield is expected to under-perform the Old Westbury. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated High Yield is 1.07 times less risky than Old Westbury. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Old Westbury Short Term is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,020  in Old Westbury Short Term on October 10, 2024 and sell it today you would lose (11.00) from holding Old Westbury Short Term or give up 1.08% of portfolio value over 90 days.

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

Federated High Yield  vs.  Old Westbury Short Term

Federated High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated High Yield are ranked lower than 1 (%) 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.

Old Westbury Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Federated High and Old Westbury

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

The idea behind Federated High Yield and Old Westbury Short Term 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.