Correlation Between Mondrian Global and Federated Floating

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

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

Diversification Opportunities for Mondrian Global and Federated Floating

-0.8

Correlation Coefficient

Mondrian Global  Federated Floating

Pay attention - limited upside

The 3 months correlation between Mondrian and Federated is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mondrian Global Equity and Federated Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Floating Rate and Mondrian Global 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 Mondrian Global Equity are associated (or correlated) with Federated Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Floating Rate has no effect on the direction of Mondrian Global i.e., Mondrian Global and Federated Floating go up and down completely randomly.

Pair Corralation between Mondrian Global and Federated Floating

Assuming the 90 days horizon Mondrian Global Equity is expected to under-perform the Federated Floating. In addition to that, Mondrian Global is 10.19 times more volatile than Federated Floating Rate. It trades about -0.29 of its total potential returns per unit of risk. Federated Floating Rate is currently generating about -0.38 per unit of volatility. If you would invest  869.00  in Federated Floating Rate on September 24, 2024 and sell it today you would lose (4.00) from holding Federated Floating Rate or give up 0.46% of portfolio value over 90 days.

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

Mondrian Global Equity  vs.  Federated Floating Rate

Mondrian Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondrian Global Equity 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 Floating Rate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Floating Rate are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mondrian Global and Federated Floating

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

The idea behind Mondrian Global Equity and Federated Floating Rate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.