Correlation Between Federated and Federated Kaufmann

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

Diversification Opportunities for Federated and Federated Kaufmann

-0.77

Correlation Coefficient

Federated  Federated Kaufmann

Pay attention - limited upside

The 3 months correlation between Federated and Federated is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Kaufmann Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Small 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 Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Small has no effect on the direction of Federated i.e., Federated and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Federated and Federated Kaufmann

Assuming the 90 days horizon Federated Gov Sec is expected to generate 0.08 times more return on investment than Federated Kaufmann. However, Federated Gov Sec is 12.09 times less risky than Federated Kaufmann. It trades about 0.21 of its potential returns per unit of risk. Federated Kaufmann Small is currently generating about -0.11 per unit of risk. If you would invest  950.00  in Federated Gov Sec on December 30, 2024 and sell it today you would earn a total of  16.00  from holding Federated Gov Sec or generate 1.68% return on investment over 90 days.

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

Federated Gov Sec  vs.  Federated Kaufmann Small

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 16 (%) 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 Kaufmann Small

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Federated and Federated Kaufmann

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

The idea behind Federated Gov Sec and Federated Kaufmann Small 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.