Correlation Between Federated Global and Federated Government
Can any of the company-specific risk be diversified away by investing in both Federated Global and Federated Government 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 Global and Federated Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Global Allocation and Federated Government Ultrashort, you can compare the effects of market volatilities on Federated Global and Federated Government 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 Global with a short position of Federated Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Federated Government.
Diversification Opportunities for Federated Global and Federated Government
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federated and Federated is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Allocation and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government and Federated Global 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 Global Allocation are associated (or correlated) with Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Federated Global i.e., Federated Global and Federated Government go up and down completely randomly.
Pair Corralation between Federated Global and Federated Government
Assuming the 90 days horizon Federated Global Allocation is expected to generate 11.63 times more return on investment than Federated Government. However, Federated Global is 11.63 times more volatile than Federated Government Ultrashort. It trades about 0.34 of its potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.12 per unit of risk. If you would invest 2,035 in Federated Global Allocation on September 1, 2024 and sell it today you would earn a total of 68.00 from holding Federated Global Allocation or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Global Allocation vs. Federated Government Ultrashor
Performance |
| Timeline |
| Federated Global All |
| Federated Government |
Federated Global and Federated Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Global and Federated Government
The main advantage of trading using opposite Federated Global and Federated Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global position performs unexpectedly, Federated Government 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 Government will offset losses from the drop in Federated Government's long position.| Federated Global vs. Federated Kaufmann Large | Federated Global vs. Federated Mdt Large | Federated Global vs. Federated Mid Cap Index | Federated Global vs. Federated Max Cap Index |
| Federated Government vs. Federated Emerging Market | Federated Government vs. Federated Mdt All | Federated Government vs. Federated Mdt Balanced | Federated Government vs. Federated Global Allocation |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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