Correlation Between Federated Gov and Federated Mid-cap

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

Diversification Opportunities for Federated Gov and Federated Mid-cap

-0.37

Correlation Coefficient

Federated Gov  Federated Mid-cap

Very good diversification

The 3 months correlation between Federated and Federated is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mid Cap 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 Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mid Cap has no effect on the direction of Federated Gov i.e., Federated Gov and Federated Mid-cap go up and down completely randomly.

Pair Corralation between Federated Gov and Federated Mid-cap

Assuming the 90 days horizon Federated Gov Sec is expected to generate 0.06 times more return on investment than Federated Mid-cap. However, Federated Gov Sec is 18.08 times less risky than Federated Mid-cap. It trades about 0.14 of its potential returns per unit of risk. Federated Mid Cap Index is currently generating about -0.18 per unit of risk. If you would invest  956.00  in Federated Gov Sec on November 29, 2024 and sell it today you would earn a total of  8.00  from holding Federated Gov Sec or generate 0.84% return on investment over 90 days.

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

Federated Gov Sec  vs.  Federated Mid Cap Index

Federated Gov Sec

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Gov Sec are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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 Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Federated Gov and Federated Mid-cap

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

The idea behind Federated Gov Sec and Federated Mid Cap Index 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.