Correlation Between Federated Gov and Federated

Can any of the company-specific risk be diversified away by investing in both Federated Gov and Federated 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 Gov and Federated 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 U S, you can compare the effects of market volatilities on Federated Gov and Federated 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 Gov with a short position of Federated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Gov and Federated.

Diversification Opportunities for Federated Gov and Federated

0.9

Correlation Coefficient

Federated Gov  Federated

Almost no diversification

The 3 months correlation between Federated and Federated is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated U S and Federated Gov 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated U S has no effect on the direction of Federated Gov i.e., Federated Gov and Federated go up and down completely randomly.

Pair Corralation between Federated Gov and Federated

Assuming the 90 days horizon Federated Gov Sec is expected to generate 0.54 times more return on investment than Federated. However, Federated Gov Sec is 1.85 times less risky than Federated. It trades about 0.08 of its potential returns per unit of risk. Federated U S is currently generating about 0.02 per unit of risk. If you would invest  948.00  in Federated Gov Sec on September 21, 2024 and sell it today you would earn a total of  11.00  from holding Federated Gov Sec or generate 1.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.07%
Values	Daily Returns

Federated Gov Sec  vs.  Federated U S

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.

Federated U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated U S has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Federated Gov and Federated

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

The idea behind Federated Gov Sec and Federated U S 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.