Correlation Between Small-cap Value and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Federated Institutional 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 Small-cap Value and Federated Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Federated Institutional High, you can compare the effects of market volatilities on Small-cap Value and Federated Institutional 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 Small-cap Value with a short position of Federated Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Federated Institutional.
Diversification Opportunities for Small-cap Value and Federated Institutional
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small-cap and Federated is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional and Small-cap Value 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 Small Cap Value Fund are associated (or correlated) with Federated Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Small-cap Value i.e., Small-cap Value and Federated Institutional go up and down completely randomly.
Pair Corralation between Small-cap Value and Federated Institutional
Assuming the 90 days horizon Small Cap Value Fund is expected to under-perform the Federated Institutional. In addition to that, Small-cap Value is 7.53 times more volatile than Federated Institutional High. It trades about -0.14 of its total potential returns per unit of risk. Federated Institutional High is currently generating about -0.25 per unit of volatility. If you would invest 882.00 in Federated Institutional High on January 14, 2025 and sell it today you would lose (17.00) from holding Federated Institutional High or give up 1.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Fund vs. Federated Institutional High
Performance |
| Timeline |
| Small Cap Value |
| Federated Institutional |
Small-cap Value and Federated Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Federated Institutional
The main advantage of trading using opposite Small-cap Value and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Federated Institutional 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 Institutional will offset losses from the drop in Federated Institutional's long position.| Small-cap Value vs. Oppenheimer International Diversified | Small-cap Value vs. Delaware Limited Term Diversified | Small-cap Value vs. Fulcrum Diversified Absolute | Small-cap Value vs. Diversified Bond Fund |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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