Correlation Between Federated Max-cap and Federated

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

By analyzing existing cross correlation between Federated Max Cap Index and Federated U S, you can compare the effects of market volatilities on Federated Max-cap and Federated 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 Max-cap with a short position of Federated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Max-cap and Federated.

Diversification Opportunities for Federated Max-cap and Federated

0.22

Correlation Coefficient

Federated Max-cap  Federated

Modest diversification

The 3 months correlation between Federated and Federated is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Federated U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated U S and Federated Max-cap 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 Max Cap Index are associated (or correlated) with Federated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated U S has no effect on the direction of Federated Max-cap i.e., Federated Max-cap and Federated go up and down completely randomly.

Pair Corralation between Federated Max-cap and Federated

Assuming the 90 days horizon Federated Max Cap Index is expected to under-perform the Federated. In addition to that, Federated Max-cap is 8.39 times more volatile than Federated U S. It trades about -0.11 of its total potential returns per unit of risk. Federated U S is currently generating about 0.09 per unit of volatility. If you would invest  962.00  in Federated U S on December 2, 2024 and sell it today you would earn a total of  10.00  from holding Federated U S or generate 1.04% return on investment over 90 days.

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

Federated Max Cap Index  vs.  Federated U S

Federated Max Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Max Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated U S

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated U S are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Federated 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 Max-cap and Federated

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

The idea behind Federated Max Cap Index and Federated U S 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.