Correlation Between Federated Short-term and Dreyfus Short-term
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Dreyfus Short-term 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-term and Dreyfus Short-term 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 Dreyfus Short Term Income, you can compare the effects of market volatilities on Federated Short-term and Dreyfus Short-term 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-term with a short position of Dreyfus Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Dreyfus Short-term.
Diversification Opportunities for Federated Short-term and Dreyfus Short-term
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FEDERATED and Dreyfus is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Dreyfus Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Short Term and Federated Short-term 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 Dreyfus Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Short Term has no effect on the direction of Federated Short-term i.e., Federated Short-term and Dreyfus Short-term go up and down completely randomly.
Pair Corralation between Federated Short-term and Dreyfus Short-term
Assuming the 90 days horizon Federated Short Term Income is expected to generate 0.87 times more return on investment than Dreyfus Short-term. However, Federated Short Term Income is 1.15 times less risky than Dreyfus Short-term. It trades about 0.13 of its potential returns per unit of risk. Dreyfus Short Term Income is currently generating about 0.11 per unit of risk. If you would invest 768.00 in Federated Short Term Income on September 3, 2024 and sell it today you would earn a total of 82.00 from holding Federated Short Term Income or generate 10.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Short Term Income vs. Dreyfus Short Term Income
Performance |
| Timeline |
| Federated Short Term |
| Dreyfus Short Term |
Federated Short-term and Dreyfus Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and Dreyfus Short-term
The main advantage of trading using opposite Federated Short-term and Dreyfus Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, Dreyfus Short-term 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 Dreyfus Short-term will offset losses from the drop in Dreyfus Short-term's long position.The idea behind Federated Short Term Income and Dreyfus Short Term Income 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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