Correlation Between Federated Total and Federated

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

Diversification Opportunities for Federated Total and Federated

0.99

Correlation Coefficient

Federated Total  Federated

No risk reduction

The 3 months correlation between Federated and Federated is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return 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 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 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 Total i.e., Federated Total and Federated go up and down completely randomly.

Pair Corralation between Federated Total and Federated

Assuming the 90 days horizon Federated Total Return is expected to under-perform the Federated. In addition to that, Federated Total is 1.39 times more volatile than Federated U S. It trades about -0.18 of its total potential returns per unit of risk. Federated U S is currently generating about -0.17 per unit of volatility. If you would invest  986.00  in Federated U S on September 15, 2024 and sell it today you would lose (23.00) from holding Federated U S or give up 2.33% of portfolio value over 90 days.

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

Federated Total Return  vs.  Federated U S

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 forward-looking signals, Federated Total 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-looking signals, 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 Total and Federated

The main advantage of trading using opposite Federated Total and Federated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Total 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 Total Return 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.