Correlation Between Federated Premier and F M
Can any of the company-specific risk be diversified away by investing in both Federated Premier and F M 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 F M 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 F M Bank, you can compare the effects of market volatilities on Federated Premier and F M 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 F M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Premier and F M.
Diversification Opportunities for Federated Premier and F M
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and FMBM is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and F M Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F M Bank 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 F M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F M Bank has no effect on the direction of Federated Premier i.e., Federated Premier and F M go up and down completely randomly.
Pair Corralation between Federated Premier and F M
Considering the 90-day investment horizon Federated Premier is expected to generate 1.5 times less return on investment than F M. But when comparing it to its historical volatility, Federated Premier Municipal is 4.87 times less risky than F M. It trades about 0.04 of its potential returns per unit of risk. F M Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,125 in F M Bank on August 26, 2024 and sell it today you would lose (49.00) from holding F M Bank or give up 2.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.03% |
| Values | Daily Returns |
Federated Premier Municipal vs. F M Bank
Performance |
| Timeline |
| Federated Premier |
| F M Bank |
Federated Premier and F M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Premier and F M
The main advantage of trading using opposite Federated Premier and F M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Premier position performs unexpectedly, F M 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 F M will offset losses from the drop in F M's long position.| Federated Premier vs. Dws Strategic Municipal | Federated Premier vs. MFS Investment Grade | Federated Premier vs. Eaton Vance Municipal | Federated Premier vs. DTF Tax Free |
| F M vs. Invesco High Income | F M vs. Blackrock Muniholdings Ny | F M vs. MFS Investment Grade | F M vs. Federated Premier Municipal |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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