Correlation Between Federated High and Short Term

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

Diversification Opportunities for Federated High and Short Term

0.6

Correlation Coefficient

Federated High  Short Term

Poor diversification

The 3 months correlation between Federated and Short is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Short Term Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Investment 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Investment has no effect on the direction of Federated High i.e., Federated High and Short Term go up and down completely randomly.

Pair Corralation between Federated High and Short Term

If you would invest  627.00  in Federated High Yield on October 25, 2024 and sell it today you would earn a total of  13.00  from holding Federated High Yield or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.69%
Values	Daily Returns

Federated High Yield  vs.  Short Term Investment Trust

Federated High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated High Yield are ranked lower than 11 (%) 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.

Short Term Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Term Investment Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Term 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 Short Term

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

The idea behind Federated High Yield and Short Term Investment Trust 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.