Correlation Between Federated Mdt and Federated Kaufmann

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

Diversification Opportunities for Federated Mdt and Federated Kaufmann

0.84

Correlation Coefficient

Federated Mdt  Federated Kaufmann

Very poor diversification

The 3 months correlation between Federated and Federated is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Federated Mdt Large 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 Mdt 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 Mdt Large 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 Mdt i.e., Federated Mdt and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Federated Mdt and Federated Kaufmann

Assuming the 90 days horizon Federated Mdt Large is expected to generate 1.19 times more return on investment than Federated Kaufmann. However, Federated Mdt is 1.19 times more volatile than Federated Kaufmann Small. It trades about -0.15 of its potential returns per unit of risk. Federated Kaufmann Small is currently generating about -0.21 per unit of risk. If you would invest  3,718  in Federated Mdt Large on December 4, 2024 and sell it today you would lose (560.00) from holding Federated Mdt Large or give up 15.06% of portfolio value over 90 days.

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

Federated Mdt Large  vs.  Federated Kaufmann Small

Federated Mdt Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Mdt Large 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 essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund 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 weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Federated Mdt and Federated Kaufmann

The main advantage of trading using opposite Federated Mdt and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Mdt 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 Mdt Large 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.