Correlation Between Federated Prudent and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Federated Prudent and Dow Jones 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 Prudent and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Prudent Bear and Dow Jones Industrial, you can compare the effects of market volatilities on Federated Prudent and Dow Jones 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 Prudent with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Prudent and Dow Jones.
Diversification Opportunities for Federated Prudent and Dow Jones
-0.97 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Federated and Dow is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding Federated Prudent Bear and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Federated Prudent 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 Prudent Bear are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Federated Prudent i.e., Federated Prudent and Dow Jones go up and down completely randomly.
Pair Corralation between Federated Prudent and Dow Jones
Assuming the 90 days horizon Federated Prudent Bear is expected to under-perform the Dow Jones. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Prudent Bear is 1.37 times less risky than Dow Jones. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Dow Jones Industrial is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 4,429,313 in Dow Jones Industrial on September 12, 2024 and sell it today you would lose (4,530) from holding Dow Jones Industrial or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Prudent Bear vs. Dow Jones Industrial
Performance |
| Timeline |
Federated Prudent and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Federated Prudent Bear
Pair trading matchups for Federated Prudent
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Federated Prudent and Dow Jones
The main advantage of trading using opposite Federated Prudent and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Prudent position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Federated Prudent vs. Grizzly Short Fund | Federated Prudent vs. Inverse Sp 500 | Federated Prudent vs. HUMANA INC | Federated Prudent vs. Barloworld Ltd ADR |
| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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