Correlation Between Sp Smallcap and Federated High

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

By analyzing existing cross correlation between Sp Smallcap 600 and Federated High Income, you can compare the effects of market volatilities on Sp Smallcap and Federated High 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 Sp Smallcap with a short position of Federated High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Federated High.

Diversification Opportunities for Sp Smallcap and Federated High

-0.44

Correlation Coefficient

Sp Smallcap  Federated High

Very good diversification

The 3 months correlation between RYSVX and Federated is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Federated High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated High Income and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Federated High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated High Income has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Federated High go up and down completely randomly.

Pair Corralation between Sp Smallcap and Federated High

Assuming the 90 days horizon Sp Smallcap 600 is expected to under-perform the Federated High. In addition to that, Sp Smallcap is 7.99 times more volatile than Federated High Income. It trades about -0.14 of its total potential returns per unit of risk. Federated High Income is currently generating about 0.18 per unit of volatility. If you would invest  667.00  in Federated High Income on December 21, 2024 and sell it today you would earn a total of  11.00  from holding Federated High Income or generate 1.65% return on investment over 90 days.

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

Sp Smallcap 600  vs.  Federated High Income

Sp Smallcap 600

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp Smallcap 600 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated High Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated High Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp Smallcap and Federated High

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

The idea behind Sp Smallcap 600 and Federated High Income 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.