Correlation Between Federated High and Ridgeworth International

Can any of the company-specific risk be diversified away by investing in both Federated High and Ridgeworth International 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 Ridgeworth International 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 Ridgeworth International Equity, you can compare the effects of market volatilities on Federated High and Ridgeworth International 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 Ridgeworth International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Ridgeworth International.

Diversification Opportunities for Federated High and Ridgeworth International

0.4

Correlation Coefficient

Federated High  Ridgeworth International

Very weak diversification

The 3 months correlation between Federated and Ridgeworth is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Ridgeworth International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgeworth International 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 Ridgeworth International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgeworth International has no effect on the direction of Federated High i.e., Federated High and Ridgeworth International go up and down completely randomly.

Pair Corralation between Federated High and Ridgeworth International

Assuming the 90 days horizon Federated High Yield is expected to generate 0.04 times more return on investment than Ridgeworth International. However, Federated High Yield is 28.39 times less risky than Ridgeworth International. It trades about -0.28 of its potential returns per unit of risk. Ridgeworth International Equity is currently generating about -0.25 per unit of risk. If you would invest  644.00  in Federated High Yield on October 9, 2024 and sell it today you would lose (7.00) from holding Federated High Yield or give up 1.09% of portfolio value over 90 days.

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

Federated High Yield  vs.  Ridgeworth International Equit

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Ridgeworth International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ridgeworth International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Federated High and Ridgeworth International

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

The idea behind Federated High Yield and Ridgeworth International Equity 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.