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
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.77. 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 Income is expected to generate 0.67 times more return on investment than Federated Strategic. However, Federated High Income is 1.49 times less risky than Federated Strategic. It trades about 0.28 of its potential returns per unit of risk. Federated Strategic Income is currently generating about 0.09 per unit of risk. If you would invest 672.00 in Federated High Income on October 20, 2024 and sell it today you would earn a total of 7.00 from holding Federated High Income or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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. Federated Emerging Market | Federated High vs. Federated Mdt All | Federated High vs. Federated Mdt Balanced | Federated High vs. Federated Global Allocation |
| Federated Strategic vs. Federated Emerging Market | Federated Strategic vs. Federated Mdt All | Federated Strategic vs. Federated Mdt Balanced | Federated Strategic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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