Correlation Between Federated Intermediate and Federated Gov

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Can any of the company-specific risk be diversified away by investing in both Federated Intermediate and Federated Gov 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 Intermediate and Federated Gov into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Intermediate Municipal and Federated Gov Sec, you can compare the effects of market volatilities on Federated Intermediate and Federated Gov 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 Intermediate with a short position of Federated Gov. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Intermediate and Federated Gov.

Diversification Opportunities for Federated Intermediate and Federated Gov

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Federated and Federated is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Federated Intermediate Municip and Federated Gov Sec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Gov Sec and Federated Intermediate 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 Intermediate Municipal are associated (or correlated) with Federated Gov. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Gov Sec has no effect on the direction of Federated Intermediate i.e., Federated Intermediate and Federated Gov go up and down completely randomly.

Pair Corralation between Federated Intermediate and Federated Gov

Assuming the 90 days horizon Federated Intermediate Municipal is expected to generate 1.31 times more return on investment than Federated Gov. However, Federated Intermediate is 1.31 times more volatile than Federated Gov Sec. It trades about 0.49 of its potential returns per unit of risk. Federated Gov Sec is currently generating about 0.22 per unit of risk. If you would invest  970.00  in Federated Intermediate Municipal on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Federated Intermediate Municipal or generate 0.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Federated Intermediate Municip  vs.  Federated Gov Sec

 Performance 
       Timeline  
Federated Intermediate 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Federated Intermediate Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Federated Gov Sec 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Federated Gov Sec has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Federated Gov is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Intermediate and Federated Gov Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Federated Intermediate and Federated Gov

The main advantage of trading using opposite Federated Intermediate and Federated Gov positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Intermediate position performs unexpectedly, Federated Gov 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 Federated Gov will offset losses from the drop in Federated Gov's long position.
The idea behind Federated Intermediate Municipal and Federated Gov Sec 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.
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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