Correlation Between Federated Global and Federated Prudent
Can any of the company-specific risk be diversified away by investing in both Federated Global and Federated Prudent 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 Global and Federated Prudent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Global Total and Federated Prudent Bear, you can compare the effects of market volatilities on Federated Global and Federated Prudent 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 Global with a short position of Federated Prudent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Federated Prudent.
Diversification Opportunities for Federated Global and Federated Prudent
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Total and Federated Prudent Bear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Prudent Bear and Federated Global 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 Global Total are associated (or correlated) with Federated Prudent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Prudent Bear has no effect on the direction of Federated Global i.e., Federated Global and Federated Prudent go up and down completely randomly.
Pair Corralation between Federated Global and Federated Prudent
Assuming the 90 days horizon Federated Global Total is expected to generate 0.38 times more return on investment than Federated Prudent. However, Federated Global Total is 2.63 times less risky than Federated Prudent. It trades about 0.01 of its potential returns per unit of risk. Federated Prudent Bear is currently generating about -0.05 per unit of risk. If you would invest 816.00 in Federated Global Total on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Federated Global Total or generate 1.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Global Total vs. Federated Prudent Bear
Performance |
| Timeline |
| Federated Global Total |
| Federated Prudent Bear |
Federated Global and Federated Prudent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Global and Federated Prudent
The main advantage of trading using opposite Federated Global and Federated Prudent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global position performs unexpectedly, Federated Prudent 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 Prudent will offset losses from the drop in Federated Prudent's long position.| Federated Global vs. Federated Hermes Mdt | Federated Global vs. Federated Mdt Large | Federated Global vs. Federated High Income | Federated Global vs. Federated Hermes Conservative |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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