Correlation Between Balanced Fund and Federated Kaufmann

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

By analyzing existing cross correlation between Balanced Fund Retail and Federated Kaufmann Small, you can compare the effects of market volatilities on Balanced Fund and Federated Kaufmann 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 Balanced Fund with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Federated Kaufmann.

Diversification Opportunities for Balanced Fund and Federated Kaufmann

0.84

Correlation Coefficient

Balanced Fund  Federated Kaufmann

Very poor diversification

The 3 months correlation between Balanced and Federated is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Federated Kaufmann Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Small and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Small has no effect on the direction of Balanced Fund i.e., Balanced Fund and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Balanced Fund and Federated Kaufmann

Assuming the 90 days horizon Balanced Fund is expected to generate 3.38 times less return on investment than Federated Kaufmann. But when comparing it to its historical volatility, Balanced Fund Retail is 1.87 times less risky than Federated Kaufmann. It trades about 0.11 of its potential returns per unit of risk. Federated Kaufmann Small is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,004  in Federated Kaufmann Small on September 4, 2024 and sell it today you would earn a total of  614.00  from holding Federated Kaufmann Small or generate 12.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Balanced Fund Retail  vs.  Federated Kaufmann Small

Balanced Fund Retail

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Retail are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Kaufmann Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Small are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Balanced Fund and Federated Kaufmann

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

The idea behind Balanced Fund Retail and Federated Kaufmann Small 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.