Correlation Between Federated Government and Artisan Select

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

By analyzing existing cross correlation between Federated Government Income and Artisan Select Equity, you can compare the effects of market volatilities on Federated Government and Artisan Select 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 Government with a short position of Artisan Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Artisan Select.

Diversification Opportunities for Federated Government and Artisan Select

0.57

Correlation Coefficient

Federated Government  Artisan Select

Very weak diversification

The 3 months correlation between Federated and Artisan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Income and Artisan Select Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Select Equity and Federated Government 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 Government Income are associated (or correlated) with Artisan Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Select Equity has no effect on the direction of Federated Government i.e., Federated Government and Artisan Select go up and down completely randomly.

Pair Corralation between Federated Government and Artisan Select

Assuming the 90 days horizon Federated Government is expected to generate 1.8 times less return on investment than Artisan Select. But when comparing it to its historical volatility, Federated Government Income is 2.46 times less risky than Artisan Select. It trades about 0.16 of its potential returns per unit of risk. Artisan Select Equity is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,551  in Artisan Select Equity on December 23, 2024 and sell it today you would earn a total of  89.00  from holding Artisan Select Equity or generate 5.74% return on investment over 90 days.

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

Federated Government Income  vs.  Artisan Select Equity

Federated Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Government Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Artisan Select Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Select Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Artisan Select 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 Government and Artisan Select

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

The idea behind Federated Government Income and Artisan Select 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.