Correlation Between Great Elm and Federated Investors
Can any of the company-specific risk be diversified away by investing in both Great Elm and Federated Investors 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 Great Elm and Federated Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Elm Capital and Federated Investors B, you can compare the effects of market volatilities on Great Elm and Federated Investors 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 Great Elm with a short position of Federated Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Federated Investors.
Diversification Opportunities for Great Elm and Federated Investors
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Great and Federated is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Federated Investors B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Investors and Great Elm 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 Great Elm Capital are associated (or correlated) with Federated Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Investors has no effect on the direction of Great Elm i.e., Great Elm and Federated Investors go up and down completely randomly.
Pair Corralation between Great Elm and Federated Investors
Given the investment horizon of 90 days Great Elm Capital is expected to generate 0.98 times more return on investment than Federated Investors. However, Great Elm Capital is 1.03 times less risky than Federated Investors. It trades about 0.1 of its potential returns per unit of risk. Federated Investors B is currently generating about 0.07 per unit of risk. If you would invest 1,087 in Great Elm Capital on November 21, 2024 and sell it today you would earn a total of 19.00 from holding Great Elm Capital or generate 1.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Great Elm Capital vs. Federated Investors B
Performance |
Timeline |
Great Elm Capital |
Federated Investors |
Great Elm and Federated Investors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Elm and Federated Investors
The main advantage of trading using opposite Great Elm and Federated Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm position performs unexpectedly, Federated Investors 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 Investors will offset losses from the drop in Federated Investors' long position.Great Elm vs. John Hancock Investors | ||
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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