Correlation Between American Funds and Federated Ohio
Can any of the company-specific risk be diversified away by investing in both American Funds and Federated Ohio 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 American Funds and Federated Ohio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Strategic and Federated Ohio Municipal, you can compare the effects of market volatilities on American Funds and Federated Ohio 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 American Funds with a short position of Federated Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Federated Ohio.
Diversification Opportunities for American Funds and Federated Ohio
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and FEDERATED is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Strategic and Federated Ohio Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Ohio Municipal and American Funds 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 American Funds Strategic are associated (or correlated) with Federated Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Ohio Municipal has no effect on the direction of American Funds i.e., American Funds and Federated Ohio go up and down completely randomly.
Pair Corralation between American Funds and Federated Ohio
Assuming the 90 days horizon American Funds is expected to generate 1.85 times less return on investment than Federated Ohio. In addition to that, American Funds is 1.87 times more volatile than Federated Ohio Municipal. It trades about 0.03 of its total potential returns per unit of risk. Federated Ohio Municipal is currently generating about 0.09 per unit of volatility. If you would invest 1,007 in Federated Ohio Municipal on September 2, 2024 and sell it today you would earn a total of 45.00 from holding Federated Ohio Municipal or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Strategic vs. Federated Ohio Municipal
Performance |
| Timeline |
| American Funds Strategic |
| Federated Ohio Municipal |
American Funds and Federated Ohio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Federated Ohio
The main advantage of trading using opposite American Funds and Federated Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Federated Ohio 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 Ohio will offset losses from the drop in Federated Ohio's long position.| American Funds vs. Columbia Global Technology | American Funds vs. Mfs Technology Fund | American Funds vs. Towpath Technology | American Funds vs. Goldman Sachs Technology |
| Federated Ohio vs. Federated Emerging Market | Federated Ohio vs. Federated Mdt All | Federated Ohio vs. Federated Mdt Balanced | Federated Ohio vs. Federated Global Allocation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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