Correlation Between Federated Premier and GCM Grosvenor

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

Diversification Opportunities for Federated Premier and GCM Grosvenor

0.81

Correlation Coefficient

Federated Premier  GCM Grosvenor

Very poor diversification

The 3 months correlation between Federated and GCM is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of Federated Premier i.e., Federated Premier and GCM Grosvenor go up and down completely randomly.

Pair Corralation between Federated Premier and GCM Grosvenor

Considering the 90-day investment horizon Federated Premier is expected to generate 739.35 times less return on investment than GCM Grosvenor. But when comparing it to its historical volatility, Federated Premier Municipal is 15.52 times less risky than GCM Grosvenor. It trades about 0.0 of its potential returns per unit of risk. GCM Grosvenor is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  126.00  in GCM Grosvenor on December 28, 2024 and sell it today you would earn a total of  84.00  from holding GCM Grosvenor or generate 66.67% return on investment over 90 days.

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

Federated Premier Municipal  vs.  GCM Grosvenor

Federated Premier

Risk-Adjusted Performance

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 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.

GCM Grosvenor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federated Premier and GCM Grosvenor

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

The idea behind Federated Premier Municipal and GCM Grosvenor 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.