Correlation Between Federated Premier and Alerus Financial

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

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

Diversification Opportunities for Federated Premier and Alerus Financial

0.43

Correlation Coefficient

Federated Premier  Alerus Financial

Very weak diversification

The 3 months correlation between Federated and Alerus is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Alerus Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alerus Financial Corp and Federated Premier 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 Premier Municipal are associated (or correlated) with Alerus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alerus Financial Corp has no effect on the direction of Federated Premier i.e., Federated Premier and Alerus Financial go up and down completely randomly.

Pair Corralation between Federated Premier and Alerus Financial

Considering the 90-day investment horizon Federated Premier Municipal is expected to generate 0.29 times more return on investment than Alerus Financial. However, Federated Premier Municipal is 3.43 times less risky than Alerus Financial. It trades about 0.04 of its potential returns per unit of risk. Alerus Financial Corp is currently generating about 0.01 per unit of risk. If you would invest  974.00  in Federated Premier Municipal on September 23, 2024 and sell it today you would earn a total of  121.00  from holding Federated Premier Municipal or generate 12.42% return on investment over 90 days.

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

Federated Premier Municipal  vs.  Alerus Financial Corp

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.

Alerus Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Federated Premier and Alerus Financial

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

The idea behind Federated Premier Municipal and Alerus Financial Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.