Correlation Between Federated Pennsylvania and Capital World
Can any of the company-specific risk be diversified away by investing in both Federated Pennsylvania and Capital World 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 Capital World 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 Capital World Bond, you can compare the effects of market volatilities on Federated Pennsylvania and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Pennsylvania and Capital World.
Diversification Opportunities for Federated Pennsylvania and Capital World
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FEDERATED and Capital is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Federated Pennsylvania Municip and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Federated Pennsylvania i.e., Federated Pennsylvania and Capital World go up and down completely randomly.
Pair Corralation between Federated Pennsylvania and Capital World
Assuming the 90 days horizon Federated Pennsylvania Municipal is expected to generate 0.49 times more return on investment than Capital World. However, Federated Pennsylvania Municipal is 2.05 times less risky than Capital World. It trades about 0.1 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.03 per unit of risk. If you would invest 970.00 in Federated Pennsylvania Municipal on September 4, 2024 and sell it today you would earn a total of 47.00 from holding Federated Pennsylvania Municipal or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Pennsylvania Municip vs. Capital World Bond
Performance |
| Timeline |
| Federated Pennsylvania |
| Capital World Bond |
Federated Pennsylvania and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Pennsylvania and Capital World
The main advantage of trading using opposite Federated Pennsylvania and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Pennsylvania position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World'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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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