Correlation Between Federated High and Federated Mdt
Can any of the company-specific risk be diversified away by investing in both Federated High and Federated Mdt 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 High and Federated Mdt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated High Income and Federated Mdt Mid Cap, you can compare the effects of market volatilities on Federated High and Federated Mdt 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 High with a short position of Federated Mdt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Federated Mdt.
Diversification Opportunities for Federated High and Federated Mdt
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Federated and Federated is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Income and Federated Mdt Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Mid and Federated High 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 High Income are associated (or correlated) with Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Mid has no effect on the direction of Federated High i.e., Federated High and Federated Mdt go up and down completely randomly.
Pair Corralation between Federated High and Federated Mdt
Assuming the 90 days horizon Federated High is expected to generate 2.5 times less return on investment than Federated Mdt. But when comparing it to its historical volatility, Federated High Income is 4.3 times less risky than Federated Mdt. It trades about 0.14 of its potential returns per unit of risk. Federated Mdt Mid Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,872 in Federated Mdt Mid Cap on December 4, 2024 and sell it today you would earn a total of 1,752 from holding Federated Mdt Mid Cap or generate 45.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated High Income vs. Federated Mdt Mid Cap
Performance |
| Timeline |
| Federated High Income |
| Federated Mdt Mid |
Federated High and Federated Mdt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Federated Mdt
The main advantage of trading using opposite Federated High and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Federated Mdt 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 Federated Mdt will offset losses from the drop in Federated Mdt's long position.| Federated High vs. Nuveen Global Real | ||
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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