Correlation Between Vanguard 500 and Federated Premier
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Federated Premier 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 Vanguard 500 and Federated Premier into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Federated Premier Municipal, you can compare the effects of market volatilities on Vanguard 500 and Federated Premier 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 Vanguard 500 with a short position of Federated Premier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Federated Premier.
Diversification Opportunities for Vanguard 500 and Federated Premier
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Federated is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and Vanguard 500 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 Vanguard 500 Index are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Federated Premier go up and down completely randomly.
Pair Corralation between Vanguard 500 and Federated Premier
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 2.03 times more return on investment than Federated Premier. However, Vanguard 500 is 2.03 times more volatile than Federated Premier Municipal. It trades about -0.12 of its potential returns per unit of risk. Federated Premier Municipal is currently generating about -0.48 per unit of risk. If you would invest 56,167 in Vanguard 500 Index on October 7, 2024 and sell it today you would lose (1,316) from holding Vanguard 500 Index or give up 2.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Federated Premier Municipal
Performance |
| Timeline |
| Vanguard 500 Index |
| Federated Premier |
Vanguard 500 and Federated Premier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Federated Premier
The main advantage of trading using opposite Vanguard 500 and Federated Premier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Federated Premier 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 Premier will offset losses from the drop in Federated Premier's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Federated Premier vs. MFS Investment Grade | Federated Premier vs. Eaton Vance Municipal | Federated Premier vs. DTF Tax Free |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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