Correlation Between First Investors and Federated Premier

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

By analyzing existing cross correlation between First Investors Opportunity and Federated Premier Municipal, you can compare the effects of market volatilities on First Investors and Federated Premier 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 First Investors with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Investors and Federated Premier.

Diversification Opportunities for First Investors and Federated Premier

0.5

Correlation Coefficient

First Investors  Federated Premier

Very weak diversification

The 3 months correlation between First and Federated is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Investors Opportunity and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and First Investors 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 First Investors Opportunity are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of First Investors i.e., First Investors and Federated Premier go up and down completely randomly.

Pair Corralation between First Investors and Federated Premier

Assuming the 90 days horizon First Investors Opportunity is expected to generate 1.85 times more return on investment than Federated Premier. However, First Investors is 1.85 times more volatile than Federated Premier Municipal. It trades about 0.0 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.02 per unit of risk. If you would invest  3,605  in First Investors Opportunity on October 21, 2024 and sell it today you would lose (60.00) from holding First Investors Opportunity or give up 1.66% of portfolio value over 90 days.

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

First Investors Opportunity  vs.  Federated Premier Municipal

First Investors Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Investors Opportunity 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 Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unfluctuating performance, the Fund's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with First Investors and Federated Premier

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

The idea behind First Investors Opportunity and Federated Premier Municipal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.