Correlation Between Federated Short-term and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Federated Institutional 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 Institutional 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 Institutional High, you can compare the effects of market volatilities on Federated Short-term and Federated Institutional 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 Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Federated Institutional.
Diversification Opportunities for Federated Short-term and Federated Institutional
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and FEDERATED is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional 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 Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Federated Short-term i.e., Federated Short-term and Federated Institutional go up and down completely randomly.
Pair Corralation between Federated Short-term and Federated Institutional
Assuming the 90 days horizon Federated Short-term is expected to generate 1.49 times less return on investment than Federated Institutional. But when comparing it to its historical volatility, Federated Short Term Income is 1.19 times less risky than Federated Institutional. It trades about 0.1 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 892.00 in Federated Institutional High on September 1, 2024 and sell it today you would earn a total of 3.00 from holding Federated Institutional High or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Short Term Income vs. Federated Institutional High
Performance |
| Timeline |
| Federated Short Term |
| Federated Institutional |
Federated Short-term and Federated Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and Federated Institutional
The main advantage of trading using opposite Federated Short-term and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, Federated Institutional 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 Institutional will offset losses from the drop in Federated Institutional's long position.| Federated Short-term vs. Federated Emerging Market | Federated Short-term vs. Federated Mdt All | Federated Short-term vs. Federated Mdt Balanced | Federated Short-term vs. Federated Global Allocation |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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