Correlation Between Federated Floating and Federated Strategic

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

By analyzing existing cross correlation between Federated Floating Rate and Federated Strategic Income, you can compare the effects of market volatilities on Federated Floating and Federated Strategic 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 Floating with a short position of Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Floating and Federated Strategic.

Diversification Opportunities for Federated Floating and Federated Strategic

-0.6

Correlation Coefficient

Federated Floating  Federated Strategic

Excellent diversification

The 3 months correlation between Federated and Federated is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated Floating Rate and Federated Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic and Federated Floating 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 Floating Rate are associated (or correlated) with Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic has no effect on the direction of Federated Floating i.e., Federated Floating and Federated Strategic go up and down completely randomly.

Pair Corralation between Federated Floating and Federated Strategic

Assuming the 90 days horizon Federated Floating Rate is expected to under-perform the Federated Strategic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Floating Rate is 3.23 times less risky than Federated Strategic. The mutual fund trades about -0.15 of its potential returns per unit of risk. The Federated Strategic Income is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  828.00  in Federated Strategic Income on September 20, 2024 and sell it today you would lose (1.00) from holding Federated Strategic Income or give up 0.12% of portfolio value over 90 days.

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

Federated Floating Rate  vs.  Federated Strategic Income

Federated Floating Rate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Floating Rate are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Strategic Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Federated Strategic 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 Floating and Federated Strategic

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

The idea behind Federated Floating Rate and Federated Strategic Income 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.