Correlation Between Federated Ultrashort and Federated Total
Can any of the company-specific risk be diversified away by investing in both Federated Ultrashort and Federated Total 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 Ultrashort and Federated Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Ultrashort Bond and Federated Total Return, you can compare the effects of market volatilities on Federated Ultrashort and Federated Total 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 Ultrashort with a short position of Federated Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Ultrashort and Federated Total.
Diversification Opportunities for Federated Ultrashort and Federated Total
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federated and Federated is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Federated Ultrashort Bond and Federated Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Total Return and Federated Ultrashort 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 Ultrashort Bond are associated (or correlated) with Federated Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Total Return has no effect on the direction of Federated Ultrashort i.e., Federated Ultrashort and Federated Total go up and down completely randomly.
Pair Corralation between Federated Ultrashort and Federated Total
Assuming the 90 days horizon Federated Ultrashort Bond is expected to generate 0.25 times more return on investment than Federated Total. However, Federated Ultrashort Bond is 4.01 times less risky than Federated Total. It trades about 0.23 of its potential returns per unit of risk. Federated Total Return is currently generating about 0.02 per unit of risk. If you would invest 848.00 in Federated Ultrashort Bond on August 30, 2024 and sell it today you would earn a total of 80.00 from holding Federated Ultrashort Bond or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Ultrashort Bond vs. Federated Total Return
Performance |
| Timeline |
| Federated Ultrashort Bond |
| Federated Total Return |
Federated Ultrashort and Federated Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Ultrashort and Federated Total
The main advantage of trading using opposite Federated Ultrashort and Federated Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Ultrashort position performs unexpectedly, Federated Total 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 Total will offset losses from the drop in Federated Total's long position.The idea behind Federated Ultrashort Bond and Federated Total Return pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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