Correlation Between Mid Cap and Federated Kaufmann

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

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

Diversification Opportunities for Mid Cap and Federated Kaufmann

0.32

Correlation Coefficient

Mid Cap  Federated Kaufmann

Weak diversification

The 3 months correlation between Mid and Federated is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Federated Kaufmann Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann and Mid Cap 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 Mid Cap Growth 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 has no effect on the direction of Mid Cap i.e., Mid Cap and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Mid Cap and Federated Kaufmann

Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.16 times more return on investment than Federated Kaufmann. However, Mid Cap is 1.16 times more volatile than Federated Kaufmann Fund. It trades about 0.1 of its potential returns per unit of risk. Federated Kaufmann Fund is currently generating about 0.05 per unit of risk. If you would invest  3,876  in Mid Cap Growth on October 22, 2024 and sell it today you would earn a total of  70.00  from holding Mid Cap Growth or generate 1.81% return on investment over 90 days.

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

Mid Cap Growth  vs.  Federated Kaufmann Fund

Mid Cap Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Federated Kaufmann

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Kaufmann Fund 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 fundamental indicators 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 Mid Cap and Federated Kaufmann

The main advantage of trading using opposite Mid Cap and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Growth and Federated Kaufmann Fund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..