Correlation Between Federated and Federated Bond

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

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

Diversification Opportunities for Federated and Federated Bond

0.85

Correlation Coefficient

Federated  Federated Bond

Very poor diversification

The 3 months correlation between Federated and Federated is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond and Federated 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 Gov Sec are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Federated i.e., Federated and Federated Bond go up and down completely randomly.

Pair Corralation between Federated and Federated Bond

Assuming the 90 days horizon Federated Gov Sec is expected to generate 0.45 times more return on investment than Federated Bond. However, Federated Gov Sec is 2.24 times less risky than Federated Bond. It trades about 0.22 of its potential returns per unit of risk. Federated Bond Fund is currently generating about 0.09 per unit of risk. If you would invest  949.00  in Federated Gov Sec on December 26, 2024 and sell it today you would earn a total of  16.00  from holding Federated Gov Sec or generate 1.69% return on investment over 90 days.

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

Federated Gov Sec  vs.  Federated Bond Fund

Federated Gov Sec

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Gov Sec are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Bond Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated 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 and Federated Bond

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

The idea behind Federated Gov Sec and Federated Bond Fund 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.