Correlation Between Federated Institutional and American Mutual
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and American Mutual 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 Institutional and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Institutional High and American Mutual Fund, you can compare the effects of market volatilities on Federated Institutional and American Mutual 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 Institutional with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and American Mutual.
Diversification Opportunities for Federated Institutional and American Mutual
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Federated and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Federated Institutional 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 Institutional High are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Federated Institutional i.e., Federated Institutional and American Mutual go up and down completely randomly.
Pair Corralation between Federated Institutional and American Mutual
Assuming the 90 days horizon Federated Institutional is expected to generate 1.15 times less return on investment than American Mutual. But when comparing it to its historical volatility, Federated Institutional High is 2.87 times less risky than American Mutual. It trades about 0.14 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,740 in American Mutual Fund on November 28, 2024 and sell it today you would earn a total of 30.00 from holding American Mutual Fund or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Institutional High vs. American Mutual Fund
Performance |
| Timeline |
| Federated Institutional |
| American Mutual |
Federated Institutional and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and American Mutual
The main advantage of trading using opposite Federated Institutional and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.| Federated Institutional vs. Doubleline Global Bond | Federated Institutional vs. Mirova Global Green | Federated Institutional vs. T Rowe Price | Federated Institutional vs. Dreyfusstandish Global Fixed |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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