Correlation Between Federated Government and American Funds
Can any of the company-specific risk be diversified away by investing in both Federated Government and American Funds 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 American Funds 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 American Funds Growth, you can compare the effects of market volatilities on Federated Government and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and American Funds.
Diversification Opportunities for Federated Government and American Funds
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federated and American is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Federated Government i.e., Federated Government and American Funds go up and down completely randomly.
Pair Corralation between Federated Government and American Funds
Assuming the 90 days horizon Federated Government Ultrashort is not expected to generate positive returns. However, Federated Government Ultrashort is 26.94 times less risky than American Funds. It waists most of its returns potential to compensate for thr risk taken. American Funds is generating about 0.17 per unit of risk. If you would invest 2,574 in American Funds Growth on November 4, 2024 and sell it today you would earn a total of 77.00 from holding American Funds Growth or generate 2.99% 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. American Funds Growth
Performance |
| Timeline |
| Federated Government |
| American Funds Growth |
Federated Government and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and American Funds
The main advantage of trading using opposite Federated Government and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Federated Government vs. Hewitt Money Market | Federated Government vs. Rmb Mendon Financial | Federated Government vs. Schwab Government Money | Federated Government vs. John Hancock Money |
| American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. Nuveen Core Equity | American Funds vs. Smallcap World Fund | American Funds vs. Enhanced Fixed 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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