Correlation Between Federated Strategic and Strategic Allocation

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

By analyzing existing cross correlation between Federated Strategic Value and Strategic Allocation Moderate, you can compare the effects of market volatilities on Federated Strategic and Strategic Allocation 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 Strategic with a short position of Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and Strategic Allocation.

Diversification Opportunities for Federated Strategic and Strategic Allocation

0.29

Correlation Coefficient

Federated Strategic  Strategic Allocation

Modest diversification

The 3 months correlation between Federated and Strategic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Value and Strategic Allocation Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation and Federated Strategic 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 Strategic Value are associated (or correlated) with Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Federated Strategic i.e., Federated Strategic and Strategic Allocation go up and down completely randomly.

Pair Corralation between Federated Strategic and Strategic Allocation

Assuming the 90 days horizon Federated Strategic Value is expected to under-perform the Strategic Allocation. In addition to that, Federated Strategic is 1.46 times more volatile than Strategic Allocation Moderate. It trades about -0.06 of its total potential returns per unit of risk. Strategic Allocation Moderate is currently generating about 0.13 per unit of volatility. If you would invest  663.00  in Strategic Allocation Moderate on September 13, 2024 and sell it today you would earn a total of  23.00  from holding Strategic Allocation Moderate or generate 3.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Federated Strategic Value  vs.  Strategic Allocation Moderate

Federated Strategic Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Strategic Allocation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Allocation Moderate are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Strategic Allocation 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 Strategic and Strategic Allocation

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

The idea behind Federated Strategic Value and Strategic Allocation Moderate 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 Stocks Directory module to find actively traded stocks across global markets.