Correlation Between Federated and Federated Short-term

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

By analyzing existing cross correlation between Federated Gov Sec and Federated Short Term Income, you can compare the effects of market volatilities on Federated and Federated Short-term 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 with a short position of Federated Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated and Federated Short-term.

Diversification Opportunities for Federated and Federated Short-term

0.91

Correlation Coefficient

Federated  Federated Short-term

Almost no diversification

The 3 months correlation between Federated and Federated is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Short Term Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Short Term and Federated 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 Gov Sec are associated (or correlated) with Federated Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Short Term has no effect on the direction of Federated i.e., Federated and Federated Short-term go up and down completely randomly.

Pair Corralation between Federated and Federated Short-term

Assuming the 90 days horizon Federated Gov Sec is expected to under-perform the Federated Short-term. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Gov Sec is 1.04 times less risky than Federated Short-term. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Federated Short Term Income is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  847.00  in Federated Short Term Income on September 2, 2024 and sell it today you would earn a total of  2.00  from holding Federated Short Term Income or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Federated Gov Sec  vs.  Federated Short Term Income

Federated Gov Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Gov Sec has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Federated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Short Term

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Term Income are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated Short-term 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 and Federated Short-term

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

The idea behind Federated Gov Sec and Federated Short Term Income 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.