Correlation Between Federated High and Northern Small
Can any of the company-specific risk be diversified away by investing in both Federated High and Northern Small 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 Northern Small 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 Northern Small Cap, you can compare the effects of market volatilities on Federated High and Northern Small 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 Northern Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated High and Northern Small.
Diversification Opportunities for Federated High and Northern Small
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Federated and Northern is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Federated High Yield and Northern Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Small Cap 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 Northern Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Small Cap has no effect on the direction of Federated High i.e., Federated High and Northern Small go up and down completely randomly.
Pair Corralation between Federated High and Northern Small
Assuming the 90 days horizon Federated High is expected to generate 4.65 times less return on investment than Northern Small. But when comparing it to its historical volatility, Federated High Yield is 4.99 times less risky than Northern Small. It trades about 0.18 of its potential returns per unit of risk. Northern Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,393 in Northern Small Cap on November 3, 2024 and sell it today you would earn a total of 48.00 from holding Northern Small Cap or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Federated High Yield vs. Northern Small Cap
Performance |
| Timeline |
| Federated High Yield |
| Northern Small Cap |
Federated High and Northern Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated High and Northern Small
The main advantage of trading using opposite Federated High and Northern Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated High position performs unexpectedly, Northern Small 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 Northern Small will offset losses from the drop in Northern Small'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 |
| Northern Small vs. Science Technology Fund | Northern Small vs. Invesco Technology Fund | Northern Small vs. Global Technology Portfolio | Northern Small vs. Firsthand Technology Opportunities |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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