Correlation Between Federated Prudent and Inverse Sp

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

By analyzing existing cross correlation between Federated Prudent Bear and Inverse Sp 500, you can compare the effects of market volatilities on Federated Prudent and Inverse Sp 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 Prudent with a short position of Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Prudent and Inverse Sp.

Diversification Opportunities for Federated Prudent and Inverse Sp

0.71

Correlation Coefficient

Federated Prudent  Inverse Sp

Poor diversification

The 3 months correlation between Federated and INVERSE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Federated Prudent Bear and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 and Federated Prudent 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 Prudent Bear are associated (or correlated) with Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Federated Prudent i.e., Federated Prudent and Inverse Sp go up and down completely randomly.

Pair Corralation between Federated Prudent and Inverse Sp

Assuming the 90 days horizon Federated Prudent is expected to generate 1.07 times less return on investment than Inverse Sp. But when comparing it to its historical volatility, Federated Prudent Bear is 1.04 times less risky than Inverse Sp. It trades about 0.1 of its potential returns per unit of risk. Inverse Sp 500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11,105  in Inverse Sp 500 on December 31, 2024 and sell it today you would earn a total of  720.00  from holding Inverse Sp 500 or generate 6.48% return on investment over 90 days.

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

Federated Prudent Bear  vs.  Inverse Sp 500

Federated Prudent Bear

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Prudent Bear are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Federated Prudent may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Inverse Sp 500

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Sp 500 are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Sp may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Federated Prudent and Inverse Sp

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

The idea behind Federated Prudent Bear and Inverse Sp 500 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 Anywhere module to track or share privately all of your investments from the convenience of any device.