Correlation Between Federated Max and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Federated Max and Dow Jones 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 Max and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Max Cap Index and Dow Jones Industrial, you can compare the effects of market volatilities on Federated Max and Dow Jones 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 Max with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Max and Dow Jones.
Diversification Opportunities for Federated Max and Dow Jones
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federated and Dow is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Federated Max Cap Index and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Federated Max 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 Max Cap Index are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Federated Max i.e., Federated Max and Dow Jones go up and down completely randomly.
Pair Corralation between Federated Max and Dow Jones
Assuming the 90 days horizon Federated Max Cap Index is expected to generate 0.86 times more return on investment than Dow Jones. However, Federated Max Cap Index is 1.17 times less risky than Dow Jones. It trades about 0.07 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.01 per unit of risk. If you would invest 891.00 in Federated Max Cap Index on September 12, 2024 and sell it today you would earn a total of 6.00 from holding Federated Max Cap Index or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Max Cap Index vs. Dow Jones Industrial
Performance |
| Timeline |
Federated Max and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Federated Max Cap Index
Pair trading matchups for Federated Max
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Federated Max and Dow Jones
The main advantage of trading using opposite Federated Max and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Max position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Federated Max vs. Vanguard Total Stock | Federated Max vs. Vanguard 500 Index | Federated Max vs. Vanguard Total Stock | Federated Max vs. Vanguard Total Stock |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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