Correlation Between Federated Government and Wilmington Municipal
Can any of the company-specific risk be diversified away by investing in both Federated Government and Wilmington Municipal 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 Wilmington Municipal 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 Wilmington Municipal Bond, you can compare the effects of market volatilities on Federated Government and Wilmington Municipal 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 Wilmington Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Wilmington Municipal.
Diversification Opportunities for Federated Government and Wilmington Municipal
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federated and Wilmington is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Wilmington Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Municipal Bond 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 Wilmington Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Municipal Bond has no effect on the direction of Federated Government i.e., Federated Government and Wilmington Municipal go up and down completely randomly.
Pair Corralation between Federated Government and Wilmington Municipal
Assuming the 90 days horizon Federated Government is expected to generate 9.1 times less return on investment than Wilmington Municipal. But when comparing it to its historical volatility, Federated Government Ultrashort is 6.59 times less risky than Wilmington Municipal. It trades about 0.12 of its potential returns per unit of risk. Wilmington Municipal Bond is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,227 in Wilmington Municipal Bond on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Wilmington Municipal Bond or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Wilmington Municipal Bond
Performance |
| Timeline |
| Federated Government |
| Wilmington Municipal Bond |
Federated Government and Wilmington Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Wilmington Municipal
The main advantage of trading using opposite Federated Government and Wilmington Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Wilmington Municipal 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 Wilmington Municipal will offset losses from the drop in Wilmington Municipal'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 |
| Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Global Alpha | Wilmington Municipal vs. Wilmington Broad Market | Wilmington Municipal vs. Wilmington Municipal Bond |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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