Correlation Between Federated Kaufmann and Federated Mid

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

By analyzing existing cross correlation between Federated Kaufmann Large and Federated Mid Cap Index, you can compare the effects of market volatilities on Federated Kaufmann and Federated Mid 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 Kaufmann with a short position of Federated Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Kaufmann and Federated Mid.

Diversification Opportunities for Federated Kaufmann and Federated Mid

0.95

Correlation Coefficient

Federated Kaufmann  Federated Mid

Almost no diversification

The 3 months correlation between Federated and Federated is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Federated Kaufmann Large and Federated Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mid Cap and Federated Kaufmann 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 Kaufmann Large are associated (or correlated) with Federated Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mid Cap has no effect on the direction of Federated Kaufmann i.e., Federated Kaufmann and Federated Mid go up and down completely randomly.

Pair Corralation between Federated Kaufmann and Federated Mid

Assuming the 90 days horizon Federated Kaufmann Large is expected to generate 0.97 times more return on investment than Federated Mid. However, Federated Kaufmann Large is 1.03 times less risky than Federated Mid. It trades about 0.21 of its potential returns per unit of risk. Federated Mid Cap Index is currently generating about 0.19 per unit of risk. If you would invest  2,250  in Federated Kaufmann Large on September 2, 2024 and sell it today you would earn a total of  283.00  from holding Federated Kaufmann Large or generate 12.58% return on investment over 90 days.

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

Federated Kaufmann Large  vs.  Federated Mid Cap Index

Federated Kaufmann Large

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Federated Mid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Mid Cap Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Federated Kaufmann and Federated Mid

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

The idea behind Federated Kaufmann Large and Federated Mid Cap Index 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.