Correlation Between Federated Strategic and Federated Short-term
Can any of the company-specific risk be diversified away by investing in both Federated Strategic and Federated Short-term 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 Strategic and Federated Short-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Strategic Income and Federated Short Term Income, you can compare the effects of market volatilities on Federated Strategic and Federated Short-term 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 Strategic with a short position of Federated Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and Federated Short-term.
Diversification Opportunities for Federated Strategic and Federated Short-term
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Income and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Federated Strategic 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 Strategic Income are associated (or correlated) with Federated Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Federated Strategic i.e., Federated Strategic and Federated Short-term go up and down completely randomly.
Pair Corralation between Federated Strategic and Federated Short-term
Assuming the 90 days horizon Federated Strategic Income is expected to generate 2.22 times more return on investment than Federated Short-term. However, Federated Strategic is 2.22 times more volatile than Federated Short Term Income. It trades about 0.09 of its potential returns per unit of risk. Federated Short Term Income is currently generating about 0.12 per unit of risk. If you would invest 822.00 in Federated Strategic Income on August 30, 2024 and sell it today you would earn a total of 5.00 from holding Federated Strategic Income or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Strategic Income vs. Federated Short Term Income
Performance |
| Timeline |
| Federated Strategic |
| Federated Short Term |
Federated Strategic and Federated Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Strategic and Federated Short-term
The main advantage of trading using opposite Federated Strategic and Federated Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Strategic position performs unexpectedly, Federated Short-term 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 Short-term will offset losses from the drop in Federated Short-term's long position.| Federated Strategic vs. 1919 Financial Services | Federated Strategic vs. First Trust Specialty | Federated Strategic vs. Gabelli Global Financial | Federated Strategic vs. Icon Financial Fund |
| Federated Short-term vs. Strategic Allocation Aggressive | Federated Short-term vs. Vanguard High Yield Tax Exempt | Federated Short-term vs. Calvert High Yield | Federated Short-term vs. Ppm High Yield |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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