Correlation Between Hotchkis Wiley and Federated Equity

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

By analyzing existing cross correlation between Hotchkis Wiley Value and Federated Equity Income, you can compare the effects of market volatilities on Hotchkis Wiley and Federated Equity 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 Hotchkis Wiley with a short position of Federated Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotchkis Wiley and Federated Equity.

Diversification Opportunities for Hotchkis Wiley and Federated Equity

0.63

Correlation Coefficient

Hotchkis Wiley  Federated Equity

Poor diversification

The 3 months correlation between Hotchkis and Federated is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hotchkis Wiley Value and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income and Hotchkis Wiley 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 Hotchkis Wiley Value are associated (or correlated) with Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of Hotchkis Wiley i.e., Hotchkis Wiley and Federated Equity go up and down completely randomly.

Pair Corralation between Hotchkis Wiley and Federated Equity

Assuming the 90 days horizon Hotchkis Wiley Value is expected to generate 0.81 times more return on investment than Federated Equity. However, Hotchkis Wiley Value is 1.24 times less risky than Federated Equity. It trades about -0.08 of its potential returns per unit of risk. Federated Equity Income is currently generating about -0.15 per unit of risk. If you would invest  4,233  in Hotchkis Wiley Value on November 29, 2024 and sell it today you would lose (265.00) from holding Hotchkis Wiley Value or give up 6.26% of portfolio value over 90 days.

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

Hotchkis Wiley Value  vs.  Federated Equity Income

Hotchkis Wiley Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hotchkis Wiley Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated Equity Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Equity Income 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Hotchkis Wiley and Federated Equity

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

The idea behind Hotchkis Wiley Value and Federated Equity Income 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.