Correlation Between Transamerica High and Federated High

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

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

Diversification Opportunities for Transamerica High and Federated High

0.92

Correlation Coefficient

Transamerica High  Federated High

Almost no diversification

The 3 months correlation between Transamerica and Federated is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Transamerica High Yield and Federated High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated High Yield and Transamerica High 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 Transamerica High Yield 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 Yield has no effect on the direction of Transamerica High i.e., Transamerica High and Federated High go up and down completely randomly.

Pair Corralation between Transamerica High and Federated High

Assuming the 90 days horizon Transamerica High is expected to generate 1.39 times less return on investment than Federated High. But when comparing it to its historical volatility, Transamerica High Yield is 1.13 times less risky than Federated High. It trades about 0.13 of its potential returns per unit of risk. Federated High Yield is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  627.00  in Federated High Yield on October 24, 2024 and sell it today you would earn a total of  14.00  from holding Federated High Yield or generate 2.23% return on investment over 90 days.

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

Transamerica High Yield  vs.  Federated High Yield

Transamerica High Yield

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Transamerica High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated High Yield

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated High Yield are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Transamerica High and Federated High

The main advantage of trading using opposite Transamerica High and Federated High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transamerica High 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 Transamerica High Yield and Federated High Yield 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.