Correlation Between Inverse Government and Federated Strategic
Can any of the company-specific risk be diversified away by investing in both Inverse Government and Federated Strategic 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 Inverse Government and Federated Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Government Long and Federated Strategic Income, you can compare the effects of market volatilities on Inverse Government and Federated Strategic 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 Inverse Government with a short position of Federated Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Government and Federated Strategic.
Diversification Opportunities for Inverse Government and Federated Strategic
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and Federated is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Government Long and Federated Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Strategic and Inverse Government 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 Inverse Government Long are associated (or correlated) with Federated Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Strategic has no effect on the direction of Inverse Government i.e., Inverse Government and Federated Strategic go up and down completely randomly.
Pair Corralation between Inverse Government and Federated Strategic
Assuming the 90 days horizon Inverse Government Long is expected to under-perform the Federated Strategic. In addition to that, Inverse Government is 5.25 times more volatile than Federated Strategic Income. It trades about -0.14 of its total potential returns per unit of risk. Federated Strategic Income is currently generating about 0.42 per unit of volatility. If you would invest 820.00 in Federated Strategic Income on September 13, 2024 and sell it today you would earn a total of 11.00 from holding Federated Strategic Income or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Government Long vs. Federated Strategic Income
Performance |
| Timeline |
| Inverse Government Long |
| Federated Strategic |
Inverse Government and Federated Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Government and Federated Strategic
The main advantage of trading using opposite Inverse Government and Federated Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Government position performs unexpectedly, Federated Strategic 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 Strategic will offset losses from the drop in Federated Strategic's long position.| Inverse Government vs. Basic Materials Fund | Inverse Government vs. Basic Materials Fund | Inverse Government vs. Banking Fund Class | Inverse Government vs. Basic Materials Fund |
| Federated Strategic vs. Federated Hermes Mdt | Federated Strategic vs. Federated Mdt Large | Federated Strategic vs. Federated High Income | Federated Strategic vs. Federated Hermes Sdg |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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