Correlation Between Stone Ridge and Federated Kaufmann

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

By analyzing existing cross correlation between Stone Ridge Diversified and Federated Kaufmann Large, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Federated Kaufmann.

Diversification Opportunities for Stone Ridge and Federated Kaufmann

-0.69

Correlation Coefficient

Stone Ridge  Federated Kaufmann

Excellent diversification

The 3 months correlation between Stone and Federated is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified 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 Stone Ridge 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 Stone Ridge Diversified 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 Stone Ridge i.e., Stone Ridge and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Stone Ridge and Federated Kaufmann

Assuming the 90 days horizon Stone Ridge Diversified is expected to generate 0.09 times more return on investment than Federated Kaufmann. However, Stone Ridge Diversified is 10.62 times less risky than Federated Kaufmann. It trades about 0.25 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about -0.01 per unit of risk. If you would invest  834.00  in Stone Ridge Diversified on October 10, 2024 and sell it today you would earn a total of  234.00  from holding Stone Ridge Diversified or generate 28.06% return on investment over 90 days.

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

Stone Ridge Diversified  vs.  Federated Kaufmann Large

Stone Ridge Diversified

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge 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

0 of 100

Very Weak

Over the last 90 days Federated Kaufmann Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Stone Ridge and Federated Kaufmann

The main advantage of trading using opposite Stone Ridge and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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 Stone Ridge Diversified 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.