Correlation Between Investec Emerging and Federated Short

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

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

Diversification Opportunities for Investec Emerging and Federated Short

0.43

Correlation Coefficient

Investec Emerging  Federated Short

Very weak diversification

The 3 months correlation between Investec and Federated is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Investec Emerging Markets and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Investec Emerging 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 Investec Emerging Markets are associated (or correlated) with Federated Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Investec Emerging i.e., Investec Emerging and Federated Short go up and down completely randomly.

Pair Corralation between Investec Emerging and Federated Short

Assuming the 90 days horizon Investec Emerging Markets is expected to under-perform the Federated Short. In addition to that, Investec Emerging is 8.47 times more volatile than Federated Short Term Income. It trades about -0.07 of its total potential returns per unit of risk. Federated Short Term Income is currently generating about -0.13 per unit of volatility. If you would invest  854.00  in Federated Short Term Income on October 1, 2024 and sell it today you would lose (8.00) from holding Federated Short Term Income or give up 0.94% of portfolio value over 90 days.

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

Investec Emerging Markets  vs.  Federated Short Term Income

Investec Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Investec Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Short Term Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Investec Emerging and Federated Short

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

The idea behind Investec Emerging Markets and Federated Short Term Income 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.