Correlation Between Federated Real and Locorr Market

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

By analyzing existing cross correlation between Federated Real Return and Locorr Market Trend, you can compare the effects of market volatilities on Federated Real and Locorr Market 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 Real with a short position of Locorr Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Real and Locorr Market.

Diversification Opportunities for Federated Real and Locorr Market

-0.12

Correlation Coefficient

Federated Real  Locorr Market

Good diversification

The 3 months correlation between Federated and Locorr is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Federated Real Return and Locorr Market Trend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Market Trend and Federated Real 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 Real Return are associated (or correlated) with Locorr Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Market Trend has no effect on the direction of Federated Real i.e., Federated Real and Locorr Market go up and down completely randomly.

Pair Corralation between Federated Real and Locorr Market

Assuming the 90 days horizon Federated Real Return is expected to generate 0.31 times more return on investment than Locorr Market. However, Federated Real Return is 3.26 times less risky than Locorr Market. It trades about -0.02 of its potential returns per unit of risk. Locorr Market Trend is currently generating about -0.09 per unit of risk. If you would invest  962.00  in Federated Real Return on October 4, 2024 and sell it today you would lose (6.00) from holding Federated Real Return or give up 0.62% of portfolio value over 90 days.

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

Federated Real Return  vs.  Locorr Market Trend

Federated Real Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Locorr Market Trend

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Market Trend are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Locorr Market 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 Real and Locorr Market

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

The idea behind Federated Real Return and Locorr Market Trend 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.