Correlation Between Fundamental Large and Federated Clover
Can any of the company-specific risk be diversified away by investing in both Fundamental Large and Federated Clover 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 Fundamental Large and Federated Clover into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundamental Large Cap and Federated Clover Small, you can compare the effects of market volatilities on Fundamental Large and Federated Clover 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 Fundamental Large with a short position of Federated Clover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and Federated Clover.
Diversification Opportunities for Fundamental Large and Federated Clover
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FUNDAMENTAL and Federated is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Federated Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of Fundamental Large i.e., Fundamental Large and Federated Clover go up and down completely randomly.
Pair Corralation between Fundamental Large and Federated Clover
Assuming the 90 days horizon Fundamental Large is expected to generate 1.53 times less return on investment than Federated Clover. But when comparing it to its historical volatility, Fundamental Large Cap is 2.12 times less risky than Federated Clover. It trades about 0.37 of its potential returns per unit of risk. Federated Clover Small is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,360 in Federated Clover Small on September 4, 2024 and sell it today you would earn a total of 219.00 from holding Federated Clover Small or generate 9.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fundamental Large Cap vs. Federated Clover Small
Performance |
| Timeline |
| Fundamental Large Cap |
| Federated Clover Small |
Fundamental Large and Federated Clover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundamental Large and Federated Clover
The main advantage of trading using opposite Fundamental Large and Federated Clover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large position performs unexpectedly, Federated Clover 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 Clover will offset losses from the drop in Federated Clover's long position.| Fundamental Large vs. Regional Bank Fund | Fundamental Large vs. Regional Bank Fund | Fundamental Large vs. Multimanager Lifestyle Moderate | Fundamental Large vs. Multimanager Lifestyle Balanced |
| Federated Clover vs. Federated Emerging Market | Federated Clover vs. Federated Mdt All | Federated Clover vs. Federated Mdt Balanced | Federated Clover 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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