Correlation Between Federated Strategic and Federated Bond
Can any of the company-specific risk be diversified away by investing in both Federated Strategic and Federated Bond 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 Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Strategic Value and Federated Bond Fund, you can compare the effects of market volatilities on Federated Strategic and Federated Bond 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 Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Strategic and Federated Bond.
Diversification Opportunities for Federated Strategic and Federated Bond
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federated and Federated is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Value and Federated Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Bond 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 Value are associated (or correlated) with Federated Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Bond has no effect on the direction of Federated Strategic i.e., Federated Strategic and Federated Bond go up and down completely randomly.
Pair Corralation between Federated Strategic and Federated Bond
Assuming the 90 days horizon Federated Strategic Value is expected to generate 2.0 times more return on investment than Federated Bond. However, Federated Strategic is 2.0 times more volatile than Federated Bond Fund. It trades about 0.04 of its potential returns per unit of risk. Federated Bond Fund is currently generating about 0.05 per unit of risk. If you would invest 546.00 in Federated Strategic Value on September 3, 2024 and sell it today you would earn a total of 89.00 from holding Federated Strategic Value or generate 16.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Strategic Value vs. Federated Bond Fund
Performance |
| Timeline |
| Federated Strategic Value |
| Federated Bond |
Federated Strategic and Federated Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Strategic and Federated Bond
The main advantage of trading using opposite Federated Strategic and Federated Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Strategic position performs unexpectedly, Federated Bond 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 Bond will offset losses from the drop in Federated Bond's long position.The idea behind Federated Strategic Value and Federated Bond Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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