Correlation Between Federated Pennsylvania and Small Cap
Can any of the company-specific risk be diversified away by investing in both Federated Pennsylvania and Small Cap 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 Pennsylvania and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Pennsylvania Municipal and Small Cap Growth, you can compare the effects of market volatilities on Federated Pennsylvania and Small Cap 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 Pennsylvania with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Pennsylvania and Small Cap.
Diversification Opportunities for Federated Pennsylvania and Small Cap
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between FEDERATED and Small is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Federated Pennsylvania Municip and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Federated Pennsylvania 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 Pennsylvania Municipal are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Federated Pennsylvania i.e., Federated Pennsylvania and Small Cap go up and down completely randomly.
Pair Corralation between Federated Pennsylvania and Small Cap
Assuming the 90 days horizon Federated Pennsylvania is expected to generate 5.79 times less return on investment than Small Cap. But when comparing it to its historical volatility, Federated Pennsylvania Municipal is 5.61 times less risky than Small Cap. It trades about 0.06 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,348 in Small Cap Growth on September 4, 2024 and sell it today you would earn a total of 527.00 from holding Small Cap Growth or generate 39.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Pennsylvania Municip vs. Small Cap Growth
Performance |
| Timeline |
| Federated Pennsylvania |
| Small Cap Growth |
Federated Pennsylvania and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Pennsylvania and Small Cap
The main advantage of trading using opposite Federated Pennsylvania and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Pennsylvania position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Federated Pennsylvania vs. Federated Emerging Market | Federated Pennsylvania vs. Federated Mdt All | Federated Pennsylvania vs. Federated Mdt Balanced | Federated Pennsylvania vs. Federated Global Allocation |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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