Correlation Between Smallcap Value and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Smallcap Value and Federated Institutional 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 Smallcap Value and Federated Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Value Fund and Federated Institutional High, you can compare the effects of market volatilities on Smallcap Value and Federated Institutional 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 Smallcap Value with a short position of Federated Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Value and Federated Institutional.
Diversification Opportunities for Smallcap Value and Federated Institutional
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and FEDERATED is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Value Fund and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional and Smallcap Value 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 Smallcap Value Fund are associated (or correlated) with Federated Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Institutional has no effect on the direction of Smallcap Value i.e., Smallcap Value and Federated Institutional go up and down completely randomly.
Pair Corralation between Smallcap Value and Federated Institutional
Assuming the 90 days horizon Smallcap Value Fund is expected to generate 10.97 times more return on investment than Federated Institutional. However, Smallcap Value is 10.97 times more volatile than Federated Institutional High. It trades about 0.22 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.2 per unit of risk. If you would invest 1,285 in Smallcap Value Fund on August 31, 2024 and sell it today you would earn a total of 104.00 from holding Smallcap Value Fund or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Value Fund vs. Federated Institutional High
Performance |
| Timeline |
| Smallcap Value |
| Federated Institutional |
Smallcap Value and Federated Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Value and Federated Institutional
The main advantage of trading using opposite Smallcap Value and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Value position performs unexpectedly, Federated Institutional 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 Institutional will offset losses from the drop in Federated Institutional's long position.| Smallcap Value vs. Federated Institutional High | Smallcap Value vs. Ab Global Risk | Smallcap Value vs. Needham Aggressive Growth | Smallcap Value vs. California High Yield Municipal |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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