Correlation Between Federated Total and Mondrian Emerging

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

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

Diversification Opportunities for Federated Total and Mondrian Emerging

0.62

Correlation Coefficient

Federated Total  Mondrian Emerging

Poor diversification

The 3 months correlation between Federated and Mondrian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return and Mondrian Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondrian Emerging Markets and Federated Total 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 Total Return are associated (or correlated) with Mondrian Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondrian Emerging Markets has no effect on the direction of Federated Total i.e., Federated Total and Mondrian Emerging go up and down completely randomly.

Pair Corralation between Federated Total and Mondrian Emerging

Assuming the 90 days horizon Federated Total is expected to generate 1.55 times less return on investment than Mondrian Emerging. But when comparing it to its historical volatility, Federated Total Return is 2.7 times less risky than Mondrian Emerging. It trades about 0.18 of its potential returns per unit of risk. Mondrian Emerging Markets is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  739.00  in Mondrian Emerging Markets on December 2, 2024 and sell it today you would earn a total of  24.00  from holding Mondrian Emerging Markets or generate 3.25% return on investment over 90 days.

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

Federated Total Return  vs.  Mondrian Emerging Markets

Federated Total Return

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Total Return are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mondrian Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mondrian Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Mondrian Emerging 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 Total and Mondrian Emerging

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

The idea behind Federated Total Return and Mondrian Emerging Markets 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.