Correlation Between Federated Max-cap and Federated Bond

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

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

Diversification Opportunities for Federated Max-cap and Federated Bond

0.74

Correlation Coefficient

Federated Max-cap  Federated Bond

Poor diversification

The 3 months correlation between Federated and Federated is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond and Federated Max-cap 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 Max Cap Index are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Federated Max-cap i.e., Federated Max-cap and Federated Bond go up and down completely randomly.

Pair Corralation between Federated Max-cap and Federated Bond

Assuming the 90 days horizon Federated Max Cap Index is expected to under-perform the Federated Bond. In addition to that, Federated Max-cap is 6.21 times more volatile than Federated Bond Fund. It trades about -0.12 of its total potential returns per unit of risk. Federated Bond Fund is currently generating about 0.01 per unit of volatility. If you would invest  842.00  in Federated Bond Fund on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Federated Bond Fund or generate 0.12% return on investment over 90 days.

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

Federated Max Cap Index  vs.  Federated Bond Fund

Federated Max Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Max Cap Index 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Federated Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Federated Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Max-cap and Federated Bond

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

The idea behind Federated Max Cap Index and Federated Bond 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.