Correlation Between Federated Short-term and International Developed
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and International Developed 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 International Developed 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 International Developed Markets, you can compare the effects of market volatilities on Federated Short-term and International Developed 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 International Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and International Developed.
Diversification Opportunities for Federated Short-term and International Developed
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FEDERATED and International is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and International Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Developed 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 International Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Developed has no effect on the direction of Federated Short-term i.e., Federated Short-term and International Developed go up and down completely randomly.
Pair Corralation between Federated Short-term and International Developed
Assuming the 90 days horizon Federated Short Term Income is expected to generate 0.17 times more return on investment than International Developed. However, Federated Short Term Income is 5.79 times less risky than International Developed. It trades about 0.17 of its potential returns per unit of risk. International Developed Markets is currently generating about 0.01 per unit of risk. If you would invest 825.00 in Federated Short Term Income on September 3, 2024 and sell it today you would earn a total of 25.00 from holding Federated Short Term Income or generate 3.03% 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. International Developed Market
Performance |
| Timeline |
| Federated Short Term |
| International Developed |
Federated Short-term and International Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and International Developed
The main advantage of trading using opposite Federated Short-term and International Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, International Developed 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 International Developed will offset losses from the drop in International Developed's long position.The idea behind Federated Short Term Income and International Developed Markets 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.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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