Correlation Between Technology Fund and Federated Short

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

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

Diversification Opportunities for Technology Fund and Federated Short

0.21

Correlation Coefficient

Technology Fund  Federated Short

Modest diversification

The 3 months correlation between Technology and Federated is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Technology Fund Class and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Technology Fund 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 Technology Fund Class are associated (or correlated) with Federated Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Technology Fund i.e., Technology Fund and Federated Short go up and down completely randomly.

Pair Corralation between Technology Fund and Federated Short

Assuming the 90 days horizon Technology Fund Class is expected to generate 8.94 times more return on investment than Federated Short. However, Technology Fund is 8.94 times more volatile than Federated Short Term Income. It trades about 0.07 of its potential returns per unit of risk. Federated Short Term Income is currently generating about 0.18 per unit of risk. If you would invest  18,942  in Technology Fund Class on October 24, 2024 and sell it today you would earn a total of  297.00  from holding Technology Fund Class or generate 1.57% return on investment over 90 days.

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

Technology Fund Class  vs.  Federated Short Term Income

Technology Fund Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Fund Class are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Technology Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Short Term

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Term Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Technology Fund and Federated Short

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

The idea behind Technology Fund Class and Federated Short Term 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 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.