Correlation Between Federated Mid-cap and Federated Mdt

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

Diversification Opportunities for Federated Mid-cap and Federated Mdt

0.89

Correlation Coefficient

Federated Mid-cap  Federated Mdt

Very poor diversification

The 3 months correlation between Federated and Federated is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Mid Cap Index and Federated Mdt All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt All and Federated Mid-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 Mid 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 All has no effect on the direction of Federated Mid-cap i.e., Federated Mid-cap and Federated Mdt go up and down completely randomly.

Pair Corralation between Federated Mid-cap and Federated Mdt

Assuming the 90 days horizon Federated Mid Cap Index is expected to under-perform the Federated Mdt. In addition to that, Federated Mid-cap is 1.43 times more volatile than Federated Mdt All. It trades about -0.17 of its total potential returns per unit of risk. Federated Mdt All is currently generating about -0.11 per unit of volatility. If you would invest  5,023  in Federated Mdt All on December 2, 2024 and sell it today you would lose (429.00) from holding Federated Mdt All or give up 8.54% of portfolio value over 90 days.

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

Federated Mid Cap Index  vs.  Federated Mdt All

Federated Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Federated Mdt All

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mdt All has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Federated Mid-cap and Federated Mdt

The main advantage of trading using opposite Federated Mid-cap and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Mid-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 Mid Cap Index and Federated Mdt All 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.