Correlation Between Federated Institutional and Science Technology
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and Science Technology 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 Science Technology 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 Science Technology Fund, you can compare the effects of market volatilities on Federated Institutional and Science Technology 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 Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Science Technology.
Diversification Opportunities for Federated Institutional and Science Technology
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Science is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Technology 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 Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of Federated Institutional i.e., Federated Institutional and Science Technology go up and down completely randomly.
Pair Corralation between Federated Institutional and Science Technology
Assuming the 90 days horizon Federated Institutional is expected to generate 3.82 times less return on investment than Science Technology. But when comparing it to its historical volatility, Federated Institutional High is 7.13 times less risky than Science Technology. It trades about 0.2 of its potential returns per unit of risk. Science Technology Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,384 in Science Technology Fund on September 3, 2024 and sell it today you would earn a total of 512.00 from holding Science Technology Fund or generate 21.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Institutional High vs. Science Technology Fund
Performance |
| Timeline |
| Federated Institutional |
| Science Technology |
Federated Institutional and Science Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Science Technology
The main advantage of trading using opposite Federated Institutional and Science Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, Science Technology 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 Science Technology will offset losses from the drop in Science Technology's long position.The idea behind Federated Institutional High and Science Technology Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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