Correlation Between Federated Government and Equity Income
Can any of the company-specific risk be diversified away by investing in both Federated Government and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Federated Government and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Equity Income.
Diversification Opportunities for Federated Government and Equity Income
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FEDERATED and EQUITY is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Federated Government i.e., Federated Government and Equity Income go up and down completely randomly.
Pair Corralation between Federated Government and Equity Income
Assuming the 90 days horizon Federated Government is expected to generate 8.66 times less return on investment than Equity Income. But when comparing it to its historical volatility, Federated Government Ultrashort is 7.69 times less risky than Equity Income. It trades about 0.25 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 4,357 in Equity Income Fund on August 30, 2024 and sell it today you would earn a total of 205.00 from holding Equity Income Fund or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Equity Income Fund
Performance |
| Timeline |
| Federated Government |
| Equity Income |
Federated Government and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Equity Income
The main advantage of trading using opposite Federated Government and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income'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 |
| Equity Income vs. Us Government Securities | Equity Income vs. Federated Government Ultrashort | Equity Income vs. Lord Abbett Government | Equity Income vs. Prudential Government Income |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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