Correlation Between M Large and Federated Kaufmann

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

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

Diversification Opportunities for M Large and Federated Kaufmann

0.43

Correlation Coefficient

M Large  Federated Kaufmann

Very weak diversification

The 3 months correlation between MTCGX and Federated is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Federated Kaufmann Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann and M Large 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 M Large Cap are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann has no effect on the direction of M Large i.e., M Large and Federated Kaufmann go up and down completely randomly.

Pair Corralation between M Large and Federated Kaufmann

Assuming the 90 days horizon M Large Cap is expected to generate 1.08 times more return on investment than Federated Kaufmann. However, M Large is 1.08 times more volatile than Federated Kaufmann Fund. It trades about 0.05 of its potential returns per unit of risk. Federated Kaufmann Fund is currently generating about 0.02 per unit of risk. If you would invest  2,454  in M Large Cap on October 13, 2024 and sell it today you would earn a total of  874.00  from holding M Large Cap or generate 35.62% return on investment over 90 days.

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

M Large Cap  vs.  Federated Kaufmann Fund

M Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Federated Kaufmann

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with M Large and Federated Kaufmann

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

The idea behind M Large Cap and Federated Kaufmann Fund 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.