Correlation Between Tekla Healthcare and Federated Premier

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

By analyzing existing cross correlation between Tekla Healthcare Investors and Federated Premier Municipal, you can compare the effects of market volatilities on Tekla Healthcare and Federated Premier 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 Tekla Healthcare with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Federated Premier.

Diversification Opportunities for Tekla Healthcare and Federated Premier

0.66

Correlation Coefficient

Tekla Healthcare  Federated Premier

Poor diversification

The 3 months correlation between Tekla and Federated is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and Tekla Healthcare 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 Tekla Healthcare Investors are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Federated Premier go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Federated Premier

Considering the 90-day investment horizon Tekla Healthcare Investors is expected to under-perform the Federated Premier. In addition to that, Tekla Healthcare is 1.44 times more volatile than Federated Premier Municipal. It trades about -0.11 of its total potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.14 per unit of volatility. If you would invest  1,203  in Federated Premier Municipal on September 3, 2024 and sell it today you would lose (70.00) from holding Federated Premier Municipal or give up 5.82% of portfolio value over 90 days.

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

Tekla Healthcare Investors  vs.  Federated Premier Municipal

Tekla Healthcare Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Federated Premier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tekla Healthcare and Federated Premier

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

The idea behind Tekla Healthcare Investors and Federated Premier Municipal 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.