Correlation Between Federated Premier and TPG

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

Diversification Opportunities for Federated Premier and TPG

-0.51

Correlation Coefficient

Federated Premier  TPG

Excellent diversification

The 3 months correlation between Federated and TPG is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and TPG Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG Inc 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 TPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG Inc has no effect on the direction of Federated Premier i.e., Federated Premier and TPG go up and down completely randomly.

Pair Corralation between Federated Premier and TPG

Considering the 90-day investment horizon Federated Premier Municipal is expected to under-perform the TPG. But the fund apears to be less risky and, when comparing its historical volatility, Federated Premier Municipal is 3.49 times less risky than TPG. The fund trades about -0.26 of its potential returns per unit of risk. The TPG Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,019  in TPG Inc on October 11, 2024 and sell it today you would earn a total of  489.00  from holding TPG Inc or generate 8.12% 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.  TPG Inc

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.

TPG Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPG Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TPG may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Federated Premier and TPG

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

The idea behind Federated Premier Municipal and TPG Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.