Correlation Between Federated Premier and DTF Tax
Can any of the company-specific risk be diversified away by investing in both Federated Premier and DTF Tax 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 Premier and DTF Tax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Premier Municipal and DTF Tax Free, you can compare the effects of market volatilities on Federated Premier and DTF Tax 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 Premier with a short position of DTF Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Premier and DTF Tax.
Diversification Opportunities for Federated Premier and DTF Tax
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and DTF is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and DTF Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTF Tax Free and Federated Premier 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 Premier Municipal are associated (or correlated) with DTF Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTF Tax Free has no effect on the direction of Federated Premier i.e., Federated Premier and DTF Tax go up and down completely randomly.
Pair Corralation between Federated Premier and DTF Tax
Considering the 90-day investment horizon Federated Premier Municipal is expected to generate 1.52 times more return on investment than DTF Tax. However, Federated Premier is 1.52 times more volatile than DTF Tax Free. It trades about 0.12 of its potential returns per unit of risk. DTF Tax Free is currently generating about 0.07 per unit of risk. If you would invest 1,095 in Federated Premier Municipal on November 4, 2024 and sell it today you would earn a total of 15.00 from holding Federated Premier Municipal or generate 1.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Premier Municipal vs. DTF Tax Free
Performance |
| Timeline |
| Federated Premier |
| DTF Tax Free |
Federated Premier and DTF Tax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Premier and DTF Tax
The main advantage of trading using opposite Federated Premier and DTF Tax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier position performs unexpectedly, DTF Tax 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 DTF Tax will offset losses from the drop in DTF Tax's long position.| Federated Premier vs. MFS Investment Grade | Federated Premier vs. Eaton Vance Municipal | Federated Premier vs. DTF Tax Free |
| DTF Tax vs. MFS Investment Grade | DTF Tax vs. Eaton Vance National | DTF Tax vs. MFS High Yield | DTF Tax vs. MFS Municipal Income |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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