Correlation Between Federated Global and Federated Kaufmann

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

By analyzing existing cross correlation between Federated Global Total and Federated Kaufmann Large, you can compare the effects of market volatilities on Federated Global and Federated Kaufmann 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 Global with a short position of Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Federated Kaufmann.

Diversification Opportunities for Federated Global and Federated Kaufmann

-0.76

Correlation Coefficient

Federated Global  Federated Kaufmann

Pay attention - limited upside

The 3 months correlation between Federated and Federated is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Total and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large and Federated Global 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 Global Total are associated (or correlated) with Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Federated Global i.e., Federated Global and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Federated Global and Federated Kaufmann

Assuming the 90 days horizon Federated Global Total is expected to under-perform the Federated Kaufmann. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Global Total is 2.47 times less risky than Federated Kaufmann. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Federated Kaufmann Large is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Federated Kaufmann Large on August 31, 2024 and sell it today you would earn a total of  283.00  from holding Federated Kaufmann Large or generate 12.58% return on investment over 90 days.

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

Federated Global Total  vs.  Federated Kaufmann Large

Federated Global Total

Risk-Adjusted Performance

0 of 100

Very Weak

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

Federated Kaufmann Large

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Large are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Federated Global and Federated Kaufmann

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

The idea behind Federated Global Total and Federated Kaufmann Large 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.