Correlation Between Federated Global and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both Federated Global and Absolute Convertible 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 Global and Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Global Allocation and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Federated Global and Absolute Convertible 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 Global with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Absolute Convertible.
Diversification Opportunities for Federated Global and Absolute Convertible
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Absolute is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Allocation and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Federated Global 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 Global Allocation are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Federated Global i.e., Federated Global and Absolute Convertible go up and down completely randomly.
Pair Corralation between Federated Global and Absolute Convertible
Assuming the 90 days horizon Federated Global Allocation is expected to generate 6.14 times more return on investment than Absolute Convertible. However, Federated Global is 6.14 times more volatile than Absolute Convertible Arbitrage. It trades about 0.06 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.24 per unit of risk. If you would invest 1,713 in Federated Global Allocation on October 25, 2024 and sell it today you would earn a total of 271.00 from holding Federated Global Allocation or generate 15.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Federated Global Allocation vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| Federated Global All |
| Absolute Convertible |
Federated Global and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Global and Absolute Convertible
The main advantage of trading using opposite Federated Global and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| Federated Global vs. Federated Max Cap Index | Federated Global vs. Federated Kaufmann Fund | Federated Global vs. Federated Strategic Income | Federated Global vs. Federated Bond Fund |
| Absolute Convertible vs. Aqr Long Short Equity | Absolute Convertible vs. Small Cap Equity | Absolute Convertible vs. Quantitative Longshort Equity | Absolute Convertible vs. Gmo Global Equity |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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