Correlation Between Federated Short-intermedia and Voya Bond

Can any of the company-specific risk be diversified away by investing in both Federated Short-intermedia and Voya Bond 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 Short-intermedia and Voya Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated Short Intermediate Duration and Voya Bond Index, you can compare the effects of market volatilities on Federated Short-intermedia and Voya Bond 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 Short-intermedia with a short position of Voya Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-intermedia and Voya Bond.

Diversification Opportunities for Federated Short-intermedia and Voya Bond

0.63

Correlation Coefficient

Federated Short-intermedia  Voya Bond

Poor diversification

The 3 months correlation between Federated and Voya is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Intermediate D and Voya Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Bond Index and Federated Short-intermedia 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 Short Intermediate Duration are associated (or correlated) with Voya Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Bond Index has no effect on the direction of Federated Short-intermedia i.e., Federated Short-intermedia and Voya Bond go up and down completely randomly.

Pair Corralation between Federated Short-intermedia and Voya Bond

Assuming the 90 days horizon Federated Short-intermedia is expected to generate 1.71 times less return on investment than Voya Bond. But when comparing it to its historical volatility, Federated Short Intermediate Duration is 3.07 times less risky than Voya Bond. It trades about 0.12 of its potential returns per unit of risk. Voya Bond Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  887.00  in Voya Bond Index on October 22, 2024 and sell it today you would earn a total of  3.00  from holding Voya Bond Index or generate 0.34% return on investment over 90 days.

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

Federated Short Intermediate D  vs.  Voya Bond Index

Federated Short-intermedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Short Intermediate Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Short-intermedia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Voya Bond Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Bond Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Voya Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Short-intermedia and Voya Bond

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

The idea behind Federated Short Intermediate Duration and Voya Bond Index 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.