Correlation Between New Mountain and Federated Investors

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

By analyzing existing cross correlation between New Mountain Finance and Federated Investors B, you can compare the effects of market volatilities on New Mountain and Federated Investors 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 New Mountain with a short position of Federated Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Mountain and Federated Investors.

Diversification Opportunities for New Mountain and Federated Investors

-0.55

Correlation Coefficient

New Mountain  Federated Investors

Excellent diversification

The 3 months correlation between New and Federated is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors and New Mountain 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 New Mountain Finance are associated (or correlated) with Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of New Mountain i.e., New Mountain and Federated Investors go up and down completely randomly.

Pair Corralation between New Mountain and Federated Investors

Given the investment horizon of 90 days New Mountain Finance is expected to under-perform the Federated Investors. But the stock apears to be less risky and, when comparing its historical volatility, New Mountain Finance is 1.32 times less risky than Federated Investors. The stock trades about -0.01 of its potential returns per unit of risk. The Federated Investors B is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,449  in Federated Investors B on September 4, 2024 and sell it today you would earn a total of  822.00  from holding Federated Investors B or generate 23.83% return on investment over 90 days.

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

New Mountain Finance  vs.  Federated Investors B

New Mountain Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Mountain Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, New Mountain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Federated Investors

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Investors B are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Federated Investors demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Mountain and Federated Investors

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

The idea behind New Mountain Finance and Federated Investors B 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.