Correlation Between Sierra E and Federated Institutional
Can any of the company-specific risk be diversified away by investing in both Sierra E 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 Sierra E and Federated Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sierra E Retirement and Federated Institutional High, you can compare the effects of market volatilities on Sierra E 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 Sierra E with a short position of Federated Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra E and Federated Institutional.
Diversification Opportunities for Sierra E and Federated Institutional
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sierra and Federated is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Federated Institutional High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Institutional and Sierra E 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 Sierra E Retirement 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 Sierra E i.e., Sierra E and Federated Institutional go up and down completely randomly.
Pair Corralation between Sierra E and Federated Institutional
Assuming the 90 days horizon Sierra E Retirement is expected to generate 2.36 times more return on investment than Federated Institutional. However, Sierra E is 2.36 times more volatile than Federated Institutional High. It trades about 0.14 of its potential returns per unit of risk. Federated Institutional High is currently generating about 0.11 per unit of risk. If you would invest 2,310 in Sierra E Retirement on September 13, 2024 and sell it today you would earn a total of 16.00 from holding Sierra E Retirement or generate 0.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sierra E Retirement vs. Federated Institutional High
Performance |
| Timeline |
| Sierra E Retirement |
| Federated Institutional |
Sierra E and Federated Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sierra E and Federated Institutional
The main advantage of trading using opposite Sierra E and Federated Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra E 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.| Sierra E vs. Sierra Tactical Risk | Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Strategic Income | Sierra E vs. Sierra Strategic Income |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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