Correlation Between Federated Government and Eaton Vance
Can any of the company-specific risk be diversified away by investing in both Federated Government and Eaton Vance 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 Government and Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Income and Eaton Vance Short, you can compare the effects of market volatilities on Federated Government and Eaton Vance 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 Government with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Eaton Vance.
Diversification Opportunities for Federated Government and Eaton Vance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Eaton is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Income and Eaton Vance Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Short and Federated Government 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 Government Income are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Short has no effect on the direction of Federated Government i.e., Federated Government and Eaton Vance go up and down completely randomly.
Pair Corralation between Federated Government and Eaton Vance
Assuming the 90 days horizon Federated Government Income is expected to generate 1.75 times more return on investment than Eaton Vance. However, Federated Government is 1.75 times more volatile than Eaton Vance Short. It trades about 0.27 of its potential returns per unit of risk. Eaton Vance Short is currently generating about 0.23 per unit of risk. If you would invest 879.00 in Federated Government Income on December 6, 2024 and sell it today you would earn a total of 17.00 from holding Federated Government Income or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Government Income vs. Eaton Vance Short
Performance |
| Timeline |
| Federated Government |
| Eaton Vance Short |
Federated Government and Eaton Vance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Eaton Vance
The main advantage of trading using opposite Federated Government and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Eaton Vance 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 Eaton Vance will offset losses from the drop in Eaton Vance's long position.| Federated Government vs. Us Government Securities | ||
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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