Correlation Between Federated Strategic and Federated Clover
Can any of the company-specific risk be diversified away by investing in both Federated Strategic and Federated Clover 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 Clover 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 Clover Small, you can compare the effects of market volatilities on Federated Strategic and Federated Clover 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 Clover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and Federated Clover.
Diversification Opportunities for Federated Strategic and Federated Clover
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Federated is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Income and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small 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 Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of Federated Strategic i.e., Federated Strategic and Federated Clover go up and down completely randomly.
Pair Corralation between Federated Strategic and Federated Clover
Assuming the 90 days horizon Federated Strategic is expected to generate 7.5 times less return on investment than Federated Clover. But when comparing it to its historical volatility, Federated Strategic Income is 3.62 times less risky than Federated Clover. It trades about 0.09 of its potential returns per unit of risk. Federated Clover Small is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,411 in Federated Clover Small on October 20, 2024 and sell it today you would earn a total of 90.00 from holding Federated Clover Small or generate 3.73% 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 Clover Small
Performance |
| Timeline |
| Federated Strategic |
| Federated Clover Small |
Federated Strategic and Federated Clover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Strategic and Federated Clover
The main advantage of trading using opposite Federated Strategic and Federated Clover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Strategic position performs unexpectedly, Federated Clover 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 Clover will offset losses from the drop in Federated Clover's 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 |
| Federated Clover vs. Federated Emerging Market | Federated Clover vs. Federated Mdt All | Federated Clover vs. Federated Mdt Balanced | Federated Clover 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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