Correlation Between Federated Short-term and Transamerica High
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Transamerica High 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 Transamerica High 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 Transamerica High Yield, you can compare the effects of market volatilities on Federated Short-term and Transamerica High 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 Transamerica High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Transamerica High.
Diversification Opportunities for Federated Short-term and Transamerica High
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FEDERATED and Transamerica is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Transamerica High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica High Yield 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 Transamerica High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica High Yield has no effect on the direction of Federated Short-term i.e., Federated Short-term and Transamerica High go up and down completely randomly.
Pair Corralation between Federated Short-term and Transamerica High
Assuming the 90 days horizon Federated Short-term is expected to generate 12.6 times less return on investment than Transamerica High. But when comparing it to its historical volatility, Federated Short Term Income is 3.37 times less risky than Transamerica High. It trades about 0.05 of its potential returns per unit of risk. Transamerica High Yield is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,063 in Transamerica High Yield on September 5, 2024 and sell it today you would earn a total of 16.00 from holding Transamerica High Yield or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Short Term Income vs. Transamerica High Yield
Performance |
| Timeline |
| Federated Short Term |
| Transamerica High Yield |
Federated Short-term and Transamerica High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and Transamerica High
The main advantage of trading using opposite Federated Short-term and Transamerica High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, Transamerica High 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 Transamerica High will offset losses from the drop in Transamerica High's long position.| Federated Short-term vs. Goldman Sachs High | Federated Short-term vs. Siit High Yield | Federated Short-term vs. Victory High Income | Federated Short-term vs. Morningstar Aggressive Growth |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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