Correlation Between Federated Strategic and American Funds
Can any of the company-specific risk be diversified away by investing in both Federated Strategic and American Funds 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 American Funds 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 American Funds Emerging, you can compare the effects of market volatilities on Federated Strategic and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and American Funds.
Diversification Opportunities for Federated Strategic and American Funds
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federated and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Income and American Funds Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Emerging 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Emerging has no effect on the direction of Federated Strategic i.e., Federated Strategic and American Funds go up and down completely randomly.
Pair Corralation between Federated Strategic and American Funds
Assuming the 90 days horizon Federated Strategic Income is expected to generate 0.74 times more return on investment than American Funds. However, Federated Strategic Income is 1.35 times less risky than American Funds. It trades about 0.14 of its potential returns per unit of risk. American Funds Emerging is currently generating about -0.06 per unit of risk. If you would invest 822.00 in Federated Strategic Income on September 1, 2024 and sell it today you would earn a total of 7.00 from holding Federated Strategic Income or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Strategic Income vs. American Funds Emerging
Performance |
| Timeline |
| Federated Strategic |
| American Funds Emerging |
Federated Strategic and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Strategic and American Funds
The main advantage of trading using opposite Federated Strategic and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Strategic position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Federated Strategic vs. Federated Emerging Market | Federated Strategic vs. Federated Mdt All | Federated Strategic vs. Federated Mdt Balanced | Federated Strategic vs. Federated Global Allocation |
| American Funds vs. Icon Equity Income | American Funds vs. Us Strategic Equity | American Funds vs. Ab Select Equity | American Funds vs. Us Vector Equity |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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