Correlation Between Federated Max and Federated Gov

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

By analyzing existing cross correlation between Federated Max Cap Index and Federated Gov Sec, you can compare the effects of market volatilities on Federated Max and Federated Gov 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 Max with a short position of Federated Gov. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Max and Federated Gov.

Diversification Opportunities for Federated Max and Federated Gov

0.17

Correlation Coefficient

Federated Max  Federated Gov

Average diversification

The 3 months correlation between Federated and Federated is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Federated Gov Sec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Gov Sec and Federated Max 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 Max Cap Index are associated (or correlated) with Federated Gov. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Gov Sec has no effect on the direction of Federated Max i.e., Federated Max and Federated Gov go up and down completely randomly.

Pair Corralation between Federated Max and Federated Gov

Assuming the 90 days horizon Federated Max Cap Index is expected to under-perform the Federated Gov. In addition to that, Federated Max is 15.94 times more volatile than Federated Gov Sec. It trades about -0.07 of its total potential returns per unit of risk. Federated Gov Sec is currently generating about -0.18 per unit of volatility. If you would invest  969.00  in Federated Gov Sec on September 30, 2024 and sell it today you would lose (11.00) from holding Federated Gov Sec or give up 1.14% of portfolio value over 90 days.

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

Federated Max Cap Index  vs.  Federated Gov Sec

Federated Max Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Max Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated Gov Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Gov Sec has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Federated Gov 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 Max and Federated Gov

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

The idea behind Federated Max Cap Index and Federated Gov Sec 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 Stocks Directory module to find actively traded stocks across global markets.