Correlation Between Federated Clover and Federated Kaufmann

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

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

Diversification Opportunities for Federated Clover and Federated Kaufmann

0.88

Correlation Coefficient

Federated Clover  Federated Kaufmann

Very poor diversification

The 3 months correlation between Federated and Federated is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Federated Clover Small and Federated Kaufmann Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann and Federated Clover 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 Clover Small 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 Federated Clover i.e., Federated Clover and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Federated Clover and Federated Kaufmann

Assuming the 90 days horizon Federated Clover is expected to generate 1.22 times less return on investment than Federated Kaufmann. In addition to that, Federated Clover is 1.39 times more volatile than Federated Kaufmann Fund. It trades about 0.13 of its total potential returns per unit of risk. Federated Kaufmann Fund is currently generating about 0.22 per unit of volatility. If you would invest  576.00  in Federated Kaufmann Fund on August 31, 2024 and sell it today you would earn a total of  75.00  from holding Federated Kaufmann Fund or generate 13.02% return on investment over 90 days.

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

Federated Clover Small  vs.  Federated Kaufmann Fund

Federated Clover Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Clover Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Federated Clover may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Federated Kaufmann

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Federated Clover and Federated Kaufmann

The main advantage of trading using opposite Federated Clover and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Clover 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 Federated Clover Small 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.