Correlation Between Mid-cap Value and Federated Strategic

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

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

Diversification Opportunities for Mid-cap Value and Federated Strategic

0.54

Correlation Coefficient

Mid-cap Value  Federated Strategic

Very weak diversification

The 3 months correlation between Mid-cap and Federated is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Federated Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic Value and Mid-cap Value 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 Mid Cap Value Profund are associated (or correlated) with Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic Value has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Federated Strategic go up and down completely randomly.

Pair Corralation between Mid-cap Value and Federated Strategic

Assuming the 90 days horizon Mid Cap Value Profund is expected to under-perform the Federated Strategic. In addition to that, Mid-cap Value is 1.15 times more volatile than Federated Strategic Value. It trades about -0.12 of its total potential returns per unit of risk. Federated Strategic Value is currently generating about 0.02 per unit of volatility. If you would invest  631.00  in Federated Strategic Value on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Federated Strategic Value or generate 0.63% return on investment over 90 days.

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

Mid Cap Value Profund  vs.  Federated Strategic Value

Mid Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Value Profund 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 Strategic Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Strategic Value are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid-cap Value and Federated Strategic

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

The idea behind Mid Cap Value Profund and Federated Strategic Value 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.