Correlation Between Federated Emerging and Federated International
Can any of the company-specific risk be diversified away by investing in both Federated Emerging and Federated International 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 Federated Emerging and Federated International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Emerging Market and Federated International Small Mid, you can compare the effects of market volatilities on Federated Emerging and Federated International 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 Federated Emerging with a short position of Federated International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Emerging and Federated International.
Diversification Opportunities for Federated Emerging and Federated International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and Federated is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Federated Emerging Market and Federated International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated International and Federated 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 Federated Emerging Market are associated (or correlated) with Federated International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated International has no effect on the direction of Federated Emerging i.e., Federated Emerging and Federated International go up and down completely randomly.
Pair Corralation between Federated Emerging and Federated International
Assuming the 90 days horizon Federated Emerging Market is expected to generate 0.43 times more return on investment than Federated International. However, Federated Emerging Market is 2.35 times less risky than Federated International. It trades about 0.15 of its potential returns per unit of risk. Federated International Small Mid is currently generating about 0.02 per unit of risk. If you would invest 784.00 in Federated Emerging Market on September 2, 2024 and sell it today you would earn a total of 8.00 from holding Federated Emerging Market or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Emerging Market vs. Federated International Small
Performance |
| Timeline |
| Federated Emerging Market |
| Federated International |
Federated Emerging and Federated International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Emerging and Federated International
The main advantage of trading using opposite Federated Emerging and Federated International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Emerging position performs unexpectedly, Federated International 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 International will offset losses from the drop in Federated International's long position.| Federated Emerging vs. Jhancock Diversified Macro | Federated Emerging vs. Western Asset Diversified | Federated Emerging vs. Lord Abbett Diversified | Federated Emerging vs. American Century Diversified |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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