Correlation Between Federated Short-term and Federated Strategic
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Federated Strategic 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 Federated Strategic 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 Federated Strategic Income, you can compare the effects of market volatilities on Federated Short-term and Federated Strategic 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 Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Federated Strategic.
Diversification Opportunities for Federated Short-term and Federated Strategic
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and Federated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Federated Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic 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 Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic has no effect on the direction of Federated Short-term i.e., Federated Short-term and Federated Strategic go up and down completely randomly.
Pair Corralation between Federated Short-term and Federated Strategic
Assuming the 90 days horizon Federated Short-term is expected to generate 1.46 times less return on investment than Federated Strategic. But when comparing it to its historical volatility, Federated Short Term Income is 2.17 times less risky than Federated Strategic. It trades about 0.13 of its potential returns per unit of risk. Federated Strategic Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 718.00 in Federated Strategic Income on August 30, 2024 and sell it today you would earn a total of 116.00 from holding Federated Strategic Income or generate 16.16% 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. Federated Strategic Income
Performance |
| Timeline |
| Federated Short Term |
| Federated Strategic |
Federated Short-term and Federated Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and Federated Strategic
The main advantage of trading using opposite Federated Short-term and Federated Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, Federated Strategic 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 Strategic will offset losses from the drop in Federated Strategic's long position.| Federated Short-term vs. Dws Government Money | Federated Short-term vs. Lord Abbett Government | Federated Short-term vs. Fidelity Series Government | Federated Short-term vs. Prudential Government Income |
| Federated Strategic vs. Champlain Small | Federated Strategic vs. Baird Smallmid Cap | Federated Strategic vs. Artisan Small Cap | Federated Strategic vs. Gmo Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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