Correlation Between Federated Premier and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both Federated Premier and Eaton Vance 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 Eaton Vance 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 Eaton Vance Municipal, you can compare the effects of market volatilities on Federated Premier and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Premier and Eaton Vance.

Diversification Opportunities for Federated Premier and Eaton Vance

0.65

Correlation Coefficient

Federated Premier  Eaton Vance

Poor diversification

The 3 months correlation between Federated and Eaton is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Eaton Vance Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Municipal 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 Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Municipal has no effect on the direction of Federated Premier i.e., Federated Premier and Eaton Vance go up and down completely randomly.

Pair Corralation between Federated Premier and Eaton Vance

Considering the 90-day investment horizon Federated Premier is expected to generate 7.36 times less return on investment than Eaton Vance. In addition to that, Federated Premier is 1.55 times more volatile than Eaton Vance Municipal. It trades about 0.02 of its total potential returns per unit of risk. Eaton Vance Municipal is currently generating about 0.18 per unit of volatility. If you would invest  1,751  in Eaton Vance Municipal on December 29, 2024 and sell it today you would earn a total of  73.00  from holding Eaton Vance Municipal or generate 4.17% return on investment over 90 days.

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

Federated Premier Municipal  vs.  Eaton Vance Municipal

Federated Premier

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Eaton Vance Municipal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Municipal are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Premier and Eaton Vance

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

The idea behind Federated Premier Municipal and Eaton Vance 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.