Correlation Between Federated Strategic and Guidemark(r) Small/mid

Can any of the company-specific risk be diversified away by investing in both Federated Strategic and Guidemark(r) Small/mid 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 Guidemark(r) Small/mid 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 Guidemark Smallmid Cap, you can compare the effects of market volatilities on Federated Strategic and Guidemark(r) Small/mid 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 Guidemark(r) Small/mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and Guidemark(r) Small/mid.

Diversification Opportunities for Federated Strategic and Guidemark(r) Small/mid

0.34

Correlation Coefficient

Federated Strategic  Guidemark(r) Small/mid

Weak diversification

The 3 months correlation between Federated and Guidemark(r) is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Value and Guidemark Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidemark Smallmid Cap 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 Guidemark(r) Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidemark Smallmid Cap has no effect on the direction of Federated Strategic i.e., Federated Strategic and Guidemark(r) Small/mid go up and down completely randomly.

Pair Corralation between Federated Strategic and Guidemark(r) Small/mid

Assuming the 90 days horizon Federated Strategic Value is expected to generate 0.34 times more return on investment than Guidemark(r) Small/mid. However, Federated Strategic Value is 2.92 times less risky than Guidemark(r) Small/mid. It trades about -0.4 of its potential returns per unit of risk. Guidemark Smallmid Cap is currently generating about -0.33 per unit of risk. If you would invest  631.00  in Federated Strategic Value on October 6, 2024 and sell it today you would lose (39.00) from holding Federated Strategic Value or give up 6.18% of portfolio value over 90 days.

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

Federated Strategic Value  vs.  Guidemark Smallmid Cap

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

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Smallmid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Guidemark(r) Small/mid 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 Guidemark(r) Small/mid

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

The idea behind Federated Strategic Value and Guidemark Smallmid Cap 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.