Correlation Between Federated Ultrashort and Chartwell Short

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

By analyzing existing cross correlation between Federated Ultrashort Bond and Chartwell Short Duration, you can compare the effects of market volatilities on Federated Ultrashort and Chartwell Short 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 Ultrashort with a short position of Chartwell Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Ultrashort and Chartwell Short.

Diversification Opportunities for Federated Ultrashort and Chartwell Short

0.89

Correlation Coefficient

Federated Ultrashort  Chartwell Short

Very poor diversification

The 3 months correlation between Federated and CHARTWELL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Ultrashort Bond and Chartwell Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chartwell Short Duration and Federated Ultrashort 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 Ultrashort Bond are associated (or correlated) with Chartwell Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chartwell Short Duration has no effect on the direction of Federated Ultrashort i.e., Federated Ultrashort and Chartwell Short go up and down completely randomly.

Pair Corralation between Federated Ultrashort and Chartwell Short

Assuming the 90 days horizon Federated Ultrashort is expected to generate 1.41 times less return on investment than Chartwell Short. But when comparing it to its historical volatility, Federated Ultrashort Bond is 1.16 times less risky than Chartwell Short. It trades about 0.18 of its potential returns per unit of risk. Chartwell Short Duration is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  944.00  in Chartwell Short Duration on November 29, 2024 and sell it today you would earn a total of  13.00  from holding Chartwell Short Duration or generate 1.38% return on investment over 90 days.

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

Federated Ultrashort Bond  vs.  Chartwell Short Duration

Federated Ultrashort Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Ultrashort Bond are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Ultrashort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chartwell Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chartwell Short Duration are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Chartwell Short 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 Ultrashort and Chartwell Short

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

The idea behind Federated Ultrashort Bond and Chartwell Short Duration 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .