Correlation Between Moderate Balanced and Federated Corporate
Can any of the company-specific risk be diversified away by investing in both Moderate Balanced and Federated Corporate 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 Moderate Balanced and Federated Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moderate Balanced Allocation and Federated Porate Bond, you can compare the effects of market volatilities on Moderate Balanced and Federated Corporate 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 Moderate Balanced with a short position of Federated Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Federated Corporate.
Diversification Opportunities for Moderate Balanced and Federated Corporate
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Moderate and Federated is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Federated Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Porate Bond and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with Federated Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Porate Bond has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Federated Corporate go up and down completely randomly.
Pair Corralation between Moderate Balanced and Federated Corporate
Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 1.84 times more return on investment than Federated Corporate. However, Moderate Balanced is 1.84 times more volatile than Federated Porate Bond. It trades about 0.11 of its potential returns per unit of risk. Federated Porate Bond is currently generating about 0.01 per unit of risk. If you would invest 1,113 in Moderate Balanced Allocation on November 3, 2024 and sell it today you would earn a total of 93.00 from holding Moderate Balanced Allocation or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Moderate Balanced Allocation vs. Federated Porate Bond
Performance |
| Timeline |
| Moderate Balanced |
| Federated Porate Bond |
Moderate Balanced and Federated Corporate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Moderate Balanced and Federated Corporate
The main advantage of trading using opposite Moderate Balanced and Federated Corporate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderate Balanced position performs unexpectedly, Federated Corporate 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 Corporate will offset losses from the drop in Federated Corporate's long position.| Moderate Balanced vs. Fidelity Sai Convertible | Moderate Balanced vs. Columbia Convertible Securities | Moderate Balanced vs. Advent Claymore Convertible | Moderate Balanced vs. Putnam Convertible Securities |
| Federated Corporate vs. Cref Inflation Linked Bond | Federated Corporate vs. Guggenheim Managed Futures | Federated Corporate vs. Guidepath Managed Futures | Federated Corporate vs. Atac Inflation Rotation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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