Correlation Between Federated Gov and Federated Intermediate
Can any of the company-specific risk be diversified away by investing in both Federated Gov and Federated Intermediate 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 Gov and Federated Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Gov Sec and Federated Intermediate Municipal, you can compare the effects of market volatilities on Federated Gov and Federated Intermediate 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 Gov with a short position of Federated Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Gov and Federated Intermediate.
Diversification Opportunities for Federated Gov and Federated Intermediate
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Intermediate Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Intermediate and Federated Gov 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 Gov Sec are associated (or correlated) with Federated Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Intermediate has no effect on the direction of Federated Gov i.e., Federated Gov and Federated Intermediate go up and down completely randomly.
Pair Corralation between Federated Gov and Federated Intermediate
Assuming the 90 days horizon Federated Gov is expected to generate 2.95 times less return on investment than Federated Intermediate. But when comparing it to its historical volatility, Federated Gov Sec is 1.31 times less risky than Federated Intermediate. It trades about 0.22 of its potential returns per unit of risk. Federated Intermediate Municipal is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 970.00 in Federated Intermediate Municipal on September 13, 2024 and sell it today you would earn a total of 9.00 from holding Federated Intermediate Municipal or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Gov Sec vs. Federated Intermediate Municip
Performance |
| Timeline |
| Federated Gov Sec |
| Federated Intermediate |
Federated Gov and Federated Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Gov and Federated Intermediate
The main advantage of trading using opposite Federated Gov and Federated Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Gov position performs unexpectedly, Federated Intermediate 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 Intermediate will offset losses from the drop in Federated Intermediate's long position.| Federated Gov vs. Federated U S | Federated Gov vs. Federated Mdt Large | Federated Gov vs. Federated Total Return | Federated Gov vs. Federated Max Cap Index |
| Federated Intermediate vs. Federated Emerging Market | Federated Intermediate vs. Federated Mdt All | Federated Intermediate vs. Federated Mdt Balanced | Federated Intermediate vs. Federated Global Allocation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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