Correlation Between Federated Premier and First Trust

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

Diversification Opportunities for Federated Premier and First Trust

-0.6

Correlation Coefficient

Federated Premier  First Trust

Excellent diversification

The 3 months correlation between Federated and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of Federated Premier i.e., Federated Premier and First Trust go up and down completely randomly.

Pair Corralation between Federated Premier and First Trust

Considering the 90-day investment horizon Federated Premier Municipal is expected to under-perform the First Trust. In addition to that, Federated Premier is 1.02 times more volatile than First Trust Senior. It trades about -0.03 of its total potential returns per unit of risk. First Trust Senior is currently generating about 0.1 per unit of volatility. If you would invest  961.00  in First Trust Senior on September 27, 2024 and sell it today you would earn a total of  83.00  from holding First Trust Senior or generate 8.64% return on investment over 90 days.

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

Federated Premier Municipal  vs.  First Trust Senior

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.

First Trust Senior

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Senior are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Federated Premier and First Trust

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

The idea behind Federated Premier Municipal and First Trust Senior 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.