Correlation Between Federated Prudent and Commonwealth Real

Can any of the company-specific risk be diversified away by investing in both Federated Prudent and Commonwealth Real 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 Prudent and Commonwealth Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated Prudent Bear and Commonwealth Real Estate, you can compare the effects of market volatilities on Federated Prudent and Commonwealth Real 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 Prudent with a short position of Commonwealth Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Prudent and Commonwealth Real.

Diversification Opportunities for Federated Prudent and Commonwealth Real

-0.42

Correlation Coefficient

Federated Prudent  Commonwealth Real

Very good diversification

The 3 months correlation between Federated and Commonwealth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Federated Prudent Bear and Commonwealth Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Real Estate and Federated Prudent 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 Prudent Bear are associated (or correlated) with Commonwealth Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Real Estate has no effect on the direction of Federated Prudent i.e., Federated Prudent and Commonwealth Real go up and down completely randomly.

Pair Corralation between Federated Prudent and Commonwealth Real

Assuming the 90 days horizon Federated Prudent Bear is expected to under-perform the Commonwealth Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Prudent Bear is 1.16 times less risky than Commonwealth Real. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Commonwealth Real Estate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,425  in Commonwealth Real Estate on September 5, 2024 and sell it today you would earn a total of  138.00  from holding Commonwealth Real Estate or generate 5.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Federated Prudent Bear  vs.  Commonwealth Real Estate

Federated Prudent Bear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Prudent Bear has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Commonwealth Real Estate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Real Estate are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Commonwealth Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Prudent and Commonwealth Real

The main advantage of trading using opposite Federated Prudent and Commonwealth Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Prudent position performs unexpectedly, Commonwealth Real 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 Commonwealth Real will offset losses from the drop in Commonwealth Real's long position.

The idea behind Federated Prudent Bear and Commonwealth Real Estate 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.