Correlation Between Federated Pennsylvania and Aberdeen Short

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

By analyzing existing cross correlation between Federated Pennsylvania Municipal and Aberdeen Short Duration, you can compare the effects of market volatilities on Federated Pennsylvania and Aberdeen Short 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 Pennsylvania with a short position of Aberdeen Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Pennsylvania and Aberdeen Short.

Diversification Opportunities for Federated Pennsylvania and Aberdeen Short

0.89

Correlation Coefficient

Federated Pennsylvania  Aberdeen Short

Very poor diversification

The 3 months correlation between Federated and Aberdeen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Pennsylvania Municip and Aberdeen Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Short Duration and Federated Pennsylvania 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 Pennsylvania Municipal are associated (or correlated) with Aberdeen Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Short Duration has no effect on the direction of Federated Pennsylvania i.e., Federated Pennsylvania and Aberdeen Short go up and down completely randomly.

Pair Corralation between Federated Pennsylvania and Aberdeen Short

Assuming the 90 days horizon Federated Pennsylvania Municipal is expected to under-perform the Aberdeen Short. In addition to that, Federated Pennsylvania is 1.24 times more volatile than Aberdeen Short Duration. It trades about -0.01 of its total potential returns per unit of risk. Aberdeen Short Duration is currently generating about 0.05 per unit of volatility. If you would invest  922.00  in Aberdeen Short Duration on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Aberdeen Short Duration or generate 0.54% return on investment over 90 days.

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

Federated Pennsylvania Municip  vs.  Aberdeen Short Duration

Federated Pennsylvania

Risk-Adjusted Performance

Very Weak

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

Aberdeen Short Duration

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Short Duration are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Aberdeen Short 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 Pennsylvania and Aberdeen Short

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

The idea behind Federated Pennsylvania Municipal and Aberdeen Short Duration 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.