Correlation Between Royce Global and Federated Premier
Can any of the company-specific risk be diversified away by investing in both Royce Global and Federated Premier 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 Royce Global and Federated Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Global Value and Federated Premier Municipal, you can compare the effects of market volatilities on Royce Global and Federated Premier 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 Royce Global with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Global and Federated Premier.
Diversification Opportunities for Royce Global and Federated Premier
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Royce and Federated is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Royce Global Value and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and Royce Global 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 Royce Global Value are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Royce Global i.e., Royce Global and Federated Premier go up and down completely randomly.
Pair Corralation between Royce Global and Federated Premier
Considering the 90-day investment horizon Royce Global Value is expected to generate 2.32 times more return on investment than Federated Premier. However, Royce Global is 2.32 times more volatile than Federated Premier Municipal. It trades about -0.2 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.49 per unit of risk. If you would invest 1,135 in Royce Global Value on October 8, 2024 and sell it today you would lose (48.00) from holding Royce Global Value or give up 4.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Royce Global Value vs. Federated Premier Municipal
Performance |
Timeline |
Royce Global Value |
Federated Premier |
Royce Global and Federated Premier Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Royce Global and Federated Premier
The main advantage of trading using opposite Royce Global and Federated Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Global position performs unexpectedly, Federated Premier 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 Premier will offset losses from the drop in Federated Premier's long position.Royce Global vs. RiverNorth Flexible Municipalome | Royce Global vs. DWS Municipal Income | Royce Global vs. MFS Investment Grade | Royce Global vs. Eaton Vance National |
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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.
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