Correlation Between Federated Government and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Federated Government and Financial Industries 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 Financial Industries 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 Financial Industries Fund, you can compare the effects of market volatilities on Federated Government and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Financial Industries.
Diversification Opportunities for Federated Government and Financial Industries
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federated and Financial is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Federated Government i.e., Federated Government and Financial Industries go up and down completely randomly.
Pair Corralation between Federated Government and Financial Industries
Assuming the 90 days horizon Federated Government is expected to generate 2.0 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Federated Government Ultrashort is 10.03 times less risky than Financial Industries. It trades about 0.23 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,520 in Financial Industries Fund on November 7, 2024 and sell it today you would earn a total of 381.00 from holding Financial Industries Fund or generate 25.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Financial Industries Fund
Performance |
| Timeline |
| Federated Government |
| Financial Industries |
Federated Government and Financial Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Financial Industries
The main advantage of trading using opposite Federated Government and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.| Federated Government vs. Buffalo High Yield | Federated Government vs. T Rowe Price | Federated Government vs. Prudential High Yield | Federated Government vs. Dunham High Yield |
| Financial Industries vs. Payden High Income | Financial Industries vs. Prudential High Yield | Financial Industries vs. Dunham High Yield | Financial Industries vs. Buffalo High Yield |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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