Correlation Between Chestnut Street and Federated Kaufmann
Can any of the company-specific risk be diversified away by investing in both Chestnut Street 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 Chestnut Street and Federated Kaufmann into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chestnut Street Exchange and Federated Kaufmann Small, you can compare the effects of market volatilities on Chestnut Street 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 Chestnut Street with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and Federated Kaufmann.
Diversification Opportunities for Chestnut Street and Federated Kaufmann
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chestnut and Federated is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Federated Kaufmann Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Small and Chestnut Street 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 Chestnut Street Exchange 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 Small has no effect on the direction of Chestnut Street i.e., Chestnut Street and Federated Kaufmann go up and down completely randomly.
Pair Corralation between Chestnut Street and Federated Kaufmann
Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 0.61 times more return on investment than Federated Kaufmann. However, Chestnut Street Exchange is 1.65 times less risky than Federated Kaufmann. It trades about -0.28 of its potential returns per unit of risk. Federated Kaufmann Small is currently generating about -0.19 per unit of risk. If you would invest 117,580 in Chestnut Street Exchange on October 9, 2024 and sell it today you would lose (4,997) from holding Chestnut Street Exchange or give up 4.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chestnut Street Exchange vs. Federated Kaufmann Small
Performance |
| Timeline |
| Chestnut Street Exchange |
| Federated Kaufmann Small |
Chestnut Street and Federated Kaufmann Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chestnut Street and Federated Kaufmann
The main advantage of trading using opposite Chestnut Street and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street 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.| Chestnut Street vs. Franklin Government Money | Chestnut Street vs. Maryland Tax Free Bond | Chestnut Street vs. Pioneer Amt Free Municipal | Chestnut Street vs. T Rowe Price |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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