Correlation Between Federated Floating and Federated Bond
Can any of the company-specific risk be diversified away by investing in both Federated Floating and Federated Bond 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 Floating and Federated Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Floating Rate and Federated Bond Fund, you can compare the effects of market volatilities on Federated Floating and Federated Bond 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 Floating with a short position of Federated Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Floating and Federated Bond.
Diversification Opportunities for Federated Floating and Federated Bond
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federated and Federated is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Federated Floating Rate and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond and Federated Floating 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 Floating Rate are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Federated Floating i.e., Federated Floating and Federated Bond go up and down completely randomly.
Pair Corralation between Federated Floating and Federated Bond
Assuming the 90 days horizon Federated Floating Rate is expected to generate 0.42 times more return on investment than Federated Bond. However, Federated Floating Rate is 2.4 times less risky than Federated Bond. It trades about 0.19 of its potential returns per unit of risk. Federated Bond Fund is currently generating about -0.05 per unit of risk. If you would invest 856.00 in Federated Floating Rate on September 12, 2024 and sell it today you would earn a total of 12.00 from holding Federated Floating Rate or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Federated Floating Rate vs. Federated Bond Fund
Performance |
| Timeline |
| Federated Floating Rate |
| Federated Bond |
Federated Floating and Federated Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Floating and Federated Bond
The main advantage of trading using opposite Federated Floating and Federated Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Floating position performs unexpectedly, Federated Bond 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 Bond will offset losses from the drop in Federated Bond's long position.The idea behind Federated Floating Rate and Federated Bond Fund 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.
| Federated Bond vs. California High Yield Municipal | Federated Bond vs. Counterpoint Tactical Municipal | Federated Bond vs. Old Westbury Municipal | Federated Bond vs. Nuveen Minnesota 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |