Correlation Between Federated Real and Federated Kaufmann

Can any of the company-specific risk be diversified away by investing in both Federated Real and Federated Kaufmann 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 Federated Kaufmann 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 Federated Kaufmann Large, you can compare the effects of market volatilities on Federated Real and Federated Kaufmann 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 Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Real and Federated Kaufmann.

Diversification Opportunities for Federated Real and Federated Kaufmann

-0.66

Correlation Coefficient

Federated Real  Federated Kaufmann

Excellent diversification

The 3 months correlation between Federated and Federated is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Federated Real Return and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large 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 Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Federated Real i.e., Federated Real and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Federated Real and Federated Kaufmann

Assuming the 90 days horizon Federated Real Return is expected to under-perform the Federated Kaufmann. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Real Return is 3.14 times less risky than Federated Kaufmann. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Federated Kaufmann Large is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Federated Kaufmann Large on September 2, 2024 and sell it today you would earn a total of  283.00  from holding Federated Kaufmann Large or generate 12.58% return on investment over 90 days.

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

Federated Real Return  vs.  Federated Kaufmann Large

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 fundamental indicators, Federated Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Kaufmann Large

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Federated Real and Federated Kaufmann

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

The idea behind Federated Real Return and Federated Kaufmann Large 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.