Correlation Between Federated Government and Gateway Fund
Can any of the company-specific risk be diversified away by investing in both Federated Government and Gateway Fund 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 Government and Gateway Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Gateway Fund Class, you can compare the effects of market volatilities on Federated Government and Gateway Fund 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 Government with a short position of Gateway Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Gateway Fund.
Diversification Opportunities for Federated Government and Gateway Fund
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and Gateway is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Gateway Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gateway Fund Class and Federated Government 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 Government Ultrashort are associated (or correlated) with Gateway Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gateway Fund Class has no effect on the direction of Federated Government i.e., Federated Government and Gateway Fund go up and down completely randomly.
Pair Corralation between Federated Government and Gateway Fund
Assuming the 90 days horizon Federated Government is expected to generate 34.92 times less return on investment than Gateway Fund. But when comparing it to its historical volatility, Federated Government Ultrashort is 11.6 times less risky than Gateway Fund. It trades about 0.12 of its potential returns per unit of risk. Gateway Fund Class is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,540 in Gateway Fund Class on September 1, 2024 and sell it today you would earn a total of 173.00 from holding Gateway Fund Class or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Gateway Fund Class
Performance |
| Timeline |
| Federated Government |
| Gateway Fund Class |
Federated Government and Gateway Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Gateway Fund
The main advantage of trading using opposite Federated Government and Gateway Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Gateway Fund 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 Gateway Fund will offset losses from the drop in Gateway Fund's long position.| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
| Gateway Fund vs. Dunham Large Cap | Gateway Fund vs. T Rowe Price | Gateway Fund vs. M Large Cap | Gateway Fund vs. Tax Managed Large Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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