Correlation Between Federated Premier and Federated Investors

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

Diversification Opportunities for Federated Premier and Federated Investors

-0.48

Correlation Coefficient

Federated Premier  Federated Investors

Very good diversification

The 3 months correlation between Federated and Federated is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors 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 Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Federated Premier i.e., Federated Premier and Federated Investors go up and down completely randomly.

Pair Corralation between Federated Premier and Federated Investors

Considering the 90-day investment horizon Federated Premier is expected to generate 1.25 times less return on investment than Federated Investors. But when comparing it to its historical volatility, Federated Premier Municipal is 2.26 times less risky than Federated Investors. It trades about 0.02 of its potential returns per unit of risk. Federated Investors B is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,061  in Federated Investors B on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Federated Investors B or generate 0.2% return on investment over 90 days.

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

Federated Premier Municipal  vs.  Federated Investors B

Federated Premier

Risk-Adjusted Performance

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 recent stock price disarray, may contribute to short-term losses for the investors.

Federated Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Investors B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Federated Investors is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Federated Premier and Federated Investors

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

The idea behind Federated Premier Municipal and Federated Investors B 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.