Correlation Between Federated Prudent and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Federated Prudent and Inverse Nasdaq-100 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 Inverse Nasdaq-100 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 Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Federated Prudent and Inverse Nasdaq-100 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 Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Prudent and Inverse Nasdaq-100.
Diversification Opportunities for Federated Prudent and Inverse Nasdaq-100
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FEDERATED and Inverse is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Prudent Bear and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 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 Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Federated Prudent i.e., Federated Prudent and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Federated Prudent and Inverse Nasdaq-100
Assuming the 90 days horizon Federated Prudent Bear is expected to under-perform the Inverse Nasdaq-100. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Prudent Bear is 1.36 times less risky than Inverse Nasdaq-100. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Inverse Nasdaq 100 Strategy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,449 in Inverse Nasdaq 100 Strategy on August 30, 2024 and sell it today you would lose (9.00) from holding Inverse Nasdaq 100 Strategy or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Federated Prudent Bear vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Federated Prudent Bear |
| Inverse Nasdaq 100 |
Federated Prudent and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Prudent and Inverse Nasdaq-100
The main advantage of trading using opposite Federated Prudent and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Prudent position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's long position.| Federated Prudent vs. Baron Health Care | Federated Prudent vs. Baillie Gifford Health | Federated Prudent vs. Blackrock Health Sciences | Federated Prudent vs. The Gabelli Healthcare |
| Inverse Nasdaq-100 vs. Morgan Stanley Global | Inverse Nasdaq-100 vs. Barings Global Floating | Inverse Nasdaq-100 vs. Ab Global Bond | Inverse Nasdaq-100 vs. Kinetics Global Fund |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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