Correlation Between Short-term Government and Federated
Can any of the company-specific risk be diversified away by investing in both Short-term Government and Federated 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 Short-term Government and Federated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Federated U S, you can compare the effects of market volatilities on Short-term Government and Federated 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 Short-term Government with a short position of Federated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Federated.
Diversification Opportunities for Short-term Government and Federated
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Short-term and Federated is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Federated U S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated U S and Short-term Government 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 Short Term Government Fund are associated (or correlated) with Federated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated U S has no effect on the direction of Short-term Government i.e., Short-term Government and Federated go up and down completely randomly.
Pair Corralation between Short-term Government and Federated
Assuming the 90 days horizon Short-term Government is expected to generate 1.59 times less return on investment than Federated. In addition to that, Short-term Government is 1.04 times more volatile than Federated U S. It trades about 0.06 of its total potential returns per unit of risk. Federated U S is currently generating about 0.09 per unit of volatility. If you would invest 894.00 in Federated U S on September 2, 2024 and sell it today you would earn a total of 68.00 from holding Federated U S or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Federated U S
Performance |
| Timeline |
| Short Term Government |
| Federated U S |
Short-term Government and Federated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Federated
The main advantage of trading using opposite Short-term Government and Federated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government position performs unexpectedly, Federated 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 will offset losses from the drop in Federated's long position.| Short-term Government vs. Mid Cap Value | Short-term Government vs. Equity Growth Fund | Short-term Government vs. Income Growth Fund | Short-term Government vs. Diversified Bond Fund |
| Federated vs. Virtus Seix Government | Federated vs. Prudential Government Income | Federated vs. Short Term Government Fund | Federated vs. Franklin Adjustable Government |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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