Correlation Between Smallcap World and Federated High
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Federated High 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 Smallcap World and Federated High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Federated High Yield, you can compare the effects of market volatilities on Smallcap World and Federated High 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 Smallcap World with a short position of Federated High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Federated High.
Diversification Opportunities for Smallcap World and Federated High
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and Federated is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Federated High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated High Yield and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Federated High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated High Yield has no effect on the direction of Smallcap World i.e., Smallcap World and Federated High go up and down completely randomly.
Pair Corralation between Smallcap World and Federated High
Assuming the 90 days horizon Smallcap World Fund is expected to generate 3.93 times more return on investment than Federated High. However, Smallcap World is 3.93 times more volatile than Federated High Yield. It trades about 0.04 of its potential returns per unit of risk. Federated High Yield is currently generating about 0.13 per unit of risk. If you would invest 6,791 in Smallcap World Fund on November 2, 2024 and sell it today you would earn a total of 222.00 from holding Smallcap World Fund or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Federated High Yield
Performance |
| Timeline |
| Smallcap World |
| Federated High Yield |
Smallcap World and Federated High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Federated High
The main advantage of trading using opposite Smallcap World and Federated High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Federated High 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 High will offset losses from the drop in Federated High's long position.| Smallcap World vs. Federated Government Ultrashort | Smallcap World vs. Blackrock Global Longshort | Smallcap World vs. Fidelity Flex Servative | Smallcap World vs. Transamerica Short Term Bond |
| Federated High vs. T Rowe Price | Federated High vs. Needham Aggressive Growth | Federated High vs. Riverparknext Century Growth | Federated High vs. Small Cap Growth |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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