Correlation Between Federated Max-cap and Federated Mdt

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

Diversification Opportunities for Federated Max-cap and Federated Mdt

0.68

Correlation Coefficient

Federated Max-cap  Federated Mdt

Poor diversification

The 3 months correlation between Federated and Federated is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Federated Mdt Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Large 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 Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Large has no effect on the direction of Federated Max-cap i.e., Federated Max-cap and Federated Mdt go up and down completely randomly.

Pair Corralation between Federated Max-cap and Federated Mdt

Assuming the 90 days horizon Federated Max Cap Index is expected to under-perform the Federated Mdt. In addition to that, Federated Max-cap is 1.28 times more volatile than Federated Mdt Large. It trades about -0.07 of its total potential returns per unit of risk. Federated Mdt Large is currently generating about 0.03 per unit of volatility. If you would invest  3,076  in Federated Mdt Large on December 31, 2024 and sell it today you would earn a total of  44.00  from holding Federated Mdt Large or generate 1.43% return on investment over 90 days.

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

Federated Max Cap Index  vs.  Federated Mdt Large

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

Federated Mdt Large

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Mdt Large are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Mdt 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 Mdt

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

The idea behind Federated Max Cap Index and Federated Mdt Large 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.