Correlation Between Federated Max and Federated Global

Can any of the company-specific risk be diversified away by investing in both Federated Max and Federated Global 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 and Federated Global 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 Global Allocation, you can compare the effects of market volatilities on Federated Max and Federated Global 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 with a short position of Federated Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Max and Federated Global.

Diversification Opportunities for Federated Max and Federated Global

0.67

Correlation Coefficient

Federated Max  Federated Global

Poor diversification

The 3 months correlation between Federated and Federated is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Federated Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Global All and Federated Max 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Global All has no effect on the direction of Federated Max i.e., Federated Max and Federated Global go up and down completely randomly.

Pair Corralation between Federated Max and Federated Global

Assuming the 90 days horizon Federated Max is expected to generate 6.48 times less return on investment than Federated Global. In addition to that, Federated Max is 2.92 times more volatile than Federated Global Allocation. It trades about 0.01 of its total potential returns per unit of risk. Federated Global Allocation is currently generating about 0.12 per unit of volatility. If you would invest  1,755  in Federated Global Allocation on September 14, 2024 and sell it today you would earn a total of  305.00  from holding Federated Global Allocation or generate 17.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Federated Max Cap Index  vs.  Federated Global Allocation

Federated Max Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Federated Max is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Global All

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Global Allocation are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Federated Global 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 and Federated Global

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

The idea behind Federated Max Cap Index and Federated Global Allocation 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 CEOs Directory module to screen CEOs from public companies around the world.