Correlation Between Federated High and Multisector Bond
Can any of the company-specific risk be diversified away by investing in both Federated High and Multisector Bond 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 Multisector Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated High Yield and Multisector Bond Sma, you can compare the effects of market volatilities on Federated High and Multisector Bond 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 Multisector Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Multisector Bond.
Diversification Opportunities for Federated High and Multisector Bond
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Multisector is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Multisector Bond Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multisector Bond Sma 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 Yield are associated (or correlated) with Multisector Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multisector Bond Sma has no effect on the direction of Federated High i.e., Federated High and Multisector Bond go up and down completely randomly.
Pair Corralation between Federated High and Multisector Bond
Assuming the 90 days horizon Federated High is expected to generate 1.43 times less return on investment than Multisector Bond. But when comparing it to its historical volatility, Federated High Yield is 1.66 times less risky than Multisector Bond. It trades about 0.22 of its potential returns per unit of risk. Multisector Bond Sma is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,346 in Multisector Bond Sma on August 27, 2024 and sell it today you would earn a total of 15.00 from holding Multisector Bond Sma or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated High Yield vs. Multisector Bond Sma
Performance |
| Timeline |
| Federated High Yield |
| Multisector Bond Sma |
Federated High and Multisector Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Multisector Bond
The main advantage of trading using opposite Federated High and Multisector Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Multisector Bond 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 Multisector Bond will offset losses from the drop in Multisector Bond's long position.| Federated High vs. Janus High Yield Fund | Federated High vs. Northeast Investors Trust | Federated High vs. High Yield Fund Investor | Federated High vs. Ab Sustainable Thematic |
| Multisector Bond vs. Nuveen Minnesota Municipal | Multisector Bond vs. Morningstar Defensive Bond | Multisector Bond vs. Intermediate Term Bond Fund | Multisector Bond vs. Ishares Municipal Bond |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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