Correlation Between Federated Short and Capital World
Can any of the company-specific risk be diversified away by investing in both Federated Short and Capital World 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 Short and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Short Term Income and Capital World Bond, you can compare the effects of market volatilities on Federated Short and Capital World 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 Short with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short and Capital World.
Diversification Opportunities for Federated Short and Capital World
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Capital is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Federated Short 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 Short Term Income are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Federated Short i.e., Federated Short and Capital World go up and down completely randomly.
Pair Corralation between Federated Short and Capital World
Assuming the 90 days horizon Federated Short Term Income is expected to generate 0.37 times more return on investment than Capital World. However, Federated Short Term Income is 2.72 times less risky than Capital World. It trades about 0.18 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.01 per unit of risk. If you would invest 778.00 in Federated Short Term Income on September 12, 2024 and sell it today you would earn a total of 73.00 from holding Federated Short Term Income or generate 9.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Short Term Income vs. Capital World Bond
Performance |
| Timeline |
| Federated Short Term |
| Capital World Bond |
Federated Short and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short and Capital World
The main advantage of trading using opposite Federated Short and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Federated Short vs. Federated Hermes Mdt | Federated Short vs. Federated Mdt Large | Federated Short vs. Federated High Income | Federated Short vs. Federated Hermes Sdg |
| Capital World vs. Templeton Global Bond | Capital World vs. Templeton Global Bond | Capital World vs. Capital World Bond | Capital World vs. Capital World Bond |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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