Correlation Between Federated Institutional and Wasatch Long/short
Can any of the company-specific risk be diversified away by investing in both Federated Institutional and Wasatch Long/short 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 Wasatch Long/short 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 Wasatch Longshort Alpha, you can compare the effects of market volatilities on Federated Institutional and Wasatch Long/short 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 Wasatch Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Institutional and Wasatch Long/short.
Diversification Opportunities for Federated Institutional and Wasatch Long/short
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FEDERATED and Wasatch is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated Institutional High and Wasatch Longshort Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Longshort Alpha 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 Wasatch Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Longshort Alpha has no effect on the direction of Federated Institutional i.e., Federated Institutional and Wasatch Long/short go up and down completely randomly.
Pair Corralation between Federated Institutional and Wasatch Long/short
Assuming the 90 days horizon Federated Institutional is expected to generate 5.0 times less return on investment than Wasatch Long/short. But when comparing it to its historical volatility, Federated Institutional High is 8.51 times less risky than Wasatch Long/short. It trades about 0.12 of its potential returns per unit of risk. Wasatch Longshort Alpha is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,506 in Wasatch Longshort Alpha on September 1, 2024 and sell it today you would earn a total of 25.00 from holding Wasatch Longshort Alpha or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Institutional High vs. Wasatch Longshort Alpha
Performance |
| Timeline |
| Federated Institutional |
| Wasatch Longshort Alpha |
Federated Institutional and Wasatch Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Institutional and Wasatch Long/short
The main advantage of trading using opposite Federated Institutional and Wasatch Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Institutional position performs unexpectedly, Wasatch Long/short 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 Wasatch Long/short will offset losses from the drop in Wasatch Long/short's long position.The idea behind Federated Institutional High and Wasatch Longshort Alpha 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.
| Wasatch Long/short vs. Strategic Allocation Aggressive | Wasatch Long/short vs. Federated Institutional High | Wasatch Long/short vs. T Rowe Price | Wasatch Long/short vs. Legg Mason Partners |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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