Correlation Between Federated High and Federated Strategic
Can any of the company-specific risk be diversified away by investing in both Federated High and Federated Strategic 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 Strategic 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 Strategic Income, you can compare the effects of market volatilities on Federated High and Federated Strategic 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 Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Federated Strategic.
Diversification Opportunities for Federated High and Federated Strategic
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Federated is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Income and Federated Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic has no effect on the direction of Federated High i.e., Federated High and Federated Strategic go up and down completely randomly.
Pair Corralation between Federated High and Federated Strategic
Assuming the 90 days horizon Federated High is expected to generate 2.85 times less return on investment than Federated Strategic. But when comparing it to its historical volatility, Federated High Income is 1.08 times less risky than Federated Strategic. It trades about 0.08 of its potential returns per unit of risk. Federated Strategic Income is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 830.00 in Federated Strategic Income on September 13, 2024 and sell it today you would earn a total of 7.00 from holding Federated Strategic Income or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated High Income vs. Federated Strategic Income
Performance |
| Timeline |
| Federated High Income |
| Federated Strategic |
Federated High and Federated Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Federated Strategic
The main advantage of trading using opposite Federated High and Federated Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Federated Strategic 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 Strategic will offset losses from the drop in Federated Strategic's long position.| Federated High vs. Rbc Short Duration | Federated High vs. Quantitative Longshort Equity | Federated High vs. Lord Abbett Short | Federated High vs. Angel Oak Ultrashort |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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