Correlation Between Federated Total and Pax Balanced

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

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

Diversification Opportunities for Federated Total and Pax Balanced

0.74

Correlation Coefficient

Federated Total  Pax Balanced

Poor diversification

The 3 months correlation between Federated and Pax is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Federated Total 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 Total Return are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Federated Total i.e., Federated Total and Pax Balanced go up and down completely randomly.

Pair Corralation between Federated Total and Pax Balanced

Assuming the 90 days horizon Federated Total Return is expected to generate 0.35 times more return on investment than Pax Balanced. However, Federated Total Return is 2.89 times less risky than Pax Balanced. It trades about -0.46 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about -0.3 per unit of risk. If you would invest  947.00  in Federated Total Return on October 10, 2024 and sell it today you would lose (23.00) from holding Federated Total Return or give up 2.43% of portfolio value over 90 days.

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

Federated Total Return  vs.  Pax Balanced Fund

Federated Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Federated Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pax Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pax Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Pax Balanced 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 Total and Pax Balanced

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

The idea behind Federated Total Return and Pax Balanced 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.