Correlation Between Federated Government and Energy Fund
Can any of the company-specific risk be diversified away by investing in both Federated Government and Energy 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 Energy 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 Energy Fund Class, you can compare the effects of market volatilities on Federated Government and Energy 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 Energy Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Energy Fund.
Diversification Opportunities for Federated Government and Energy Fund
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Energy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Energy Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy 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 Energy Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Fund Class has no effect on the direction of Federated Government i.e., Federated Government and Energy Fund go up and down completely randomly.
Pair Corralation between Federated Government and Energy Fund
Assuming the 90 days horizon Federated Government Ultrashort is expected to generate 0.08 times more return on investment than Energy Fund. However, Federated Government Ultrashort is 11.9 times less risky than Energy Fund. It trades about 0.19 of its potential returns per unit of risk. Energy Fund Class is currently generating about 0.01 per unit of risk. If you would invest 954.00 in Federated Government Ultrashort on September 1, 2024 and sell it today you would earn a total of 23.00 from holding Federated Government Ultrashort or generate 2.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Energy Fund Class
Performance |
| Timeline |
| Federated Government |
| Energy Fund Class |
Federated Government and Energy Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Energy Fund
The main advantage of trading using opposite Federated Government and Energy Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Energy 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 Energy Fund will offset losses from the drop in Energy 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 |
| Energy Fund vs. Biotechnology Ultrasector Profund | Energy Fund vs. Goldman Sachs Technology | Energy Fund vs. Technology Ultrasector Profund | Energy Fund vs. Janus Global Technology |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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