Correlation Between Federated Short and Federated Mortgage
Can any of the company-specific risk be diversified away by investing in both Federated Short and Federated Mortgage 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 and Federated Mortgage 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 Mortgage Fund, you can compare the effects of market volatilities on Federated Short and Federated Mortgage 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 with a short position of Federated Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short and Federated Mortgage.
Diversification Opportunities for Federated Short and Federated Mortgage
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and Federated is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Federated Mortgage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mortgage and Federated Short 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 Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mortgage has no effect on the direction of Federated Short i.e., Federated Short and Federated Mortgage go up and down completely randomly.
Pair Corralation between Federated Short and Federated Mortgage
Assuming the 90 days horizon Federated Short is expected to generate 3.45 times less return on investment than Federated Mortgage. But when comparing it to its historical volatility, Federated Short Term Income is 2.78 times less risky than Federated Mortgage. It trades about 0.12 of its potential returns per unit of risk. Federated Mortgage Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 819.00 in Federated Mortgage Fund on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Federated Mortgage Fund or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federated Short Term Income vs. Federated Mortgage Fund
Performance |
| Timeline |
| Federated Short Term |
| Federated Mortgage |
Federated Short and Federated Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short and Federated Mortgage
The main advantage of trading using opposite Federated Short and Federated Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short position performs unexpectedly, Federated Mortgage 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 Mortgage will offset losses from the drop in Federated Mortgage's long position.| Federated Short vs. Franklin Natural Resources | Federated Short vs. Icon Natural Resources | Federated Short vs. Adams Natural Resources | Federated Short vs. Gamco Natural Resources |
| Federated Mortgage vs. Nuveen Real Estate | Federated Mortgage vs. Franklin Real Estate | Federated Mortgage vs. Guggenheim Risk Managed | Federated Mortgage vs. Dunham Real Estate |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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