Correlation Between Federated High and Federated Pennsylvania
Can any of the company-specific risk be diversified away by investing in both Federated High and Federated Pennsylvania 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 Pennsylvania 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 Pennsylvania Municipal, you can compare the effects of market volatilities on Federated High and Federated Pennsylvania 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 Pennsylvania. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Federated Pennsylvania.
Diversification Opportunities for Federated High and Federated Pennsylvania
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Income and Federated Pennsylvania Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Pennsylvania 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 Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Pennsylvania has no effect on the direction of Federated High i.e., Federated High and Federated Pennsylvania go up and down completely randomly.
Pair Corralation between Federated High and Federated Pennsylvania
Assuming the 90 days horizon Federated High Income is expected to generate 0.68 times more return on investment than Federated Pennsylvania. However, Federated High Income is 1.47 times less risky than Federated Pennsylvania. It trades about -0.13 of its potential returns per unit of risk. Federated Pennsylvania Municipal is currently generating about -0.31 per unit of risk. If you would invest 683.00 in Federated High Income on October 9, 2024 and sell it today you would lose (3.00) from holding Federated High Income or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated High Income vs. Federated Pennsylvania Municip
Performance |
| Timeline |
| Federated High Income |
| Federated Pennsylvania |
Federated High and Federated Pennsylvania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Federated Pennsylvania
The main advantage of trading using opposite Federated High and Federated Pennsylvania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Federated Pennsylvania 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 Pennsylvania will offset losses from the drop in Federated Pennsylvania's long position.| Federated High vs. Federated Emerging Market | Federated High vs. Federated Mdt All | Federated High vs. Federated Mdt Balanced | Federated High vs. Federated Global Allocation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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