Correlation Between Federated Fund and Federated Max

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

By analyzing existing cross correlation between Federated Fund For and Federated Max Cap Index, you can compare the effects of market volatilities on Federated Fund and Federated Max 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 Fund with a short position of Federated Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Fund and Federated Max.

Diversification Opportunities for Federated Fund and Federated Max

-0.75

Correlation Coefficient

Federated Fund  Federated Max

Pay attention - limited upside

The 3 months correlation between Federated and Federated is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Fund For and Federated Max Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Max Cap and Federated Fund 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 Fund For are associated (or correlated) with Federated Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Max Cap has no effect on the direction of Federated Fund i.e., Federated Fund and Federated Max go up and down completely randomly.

Pair Corralation between Federated Fund and Federated Max

Assuming the 90 days horizon Federated Fund For is expected to under-perform the Federated Max. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Fund For is 2.2 times less risky than Federated Max. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Federated Max Cap Index is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  783.00  in Federated Max Cap Index on August 31, 2024 and sell it today you would earn a total of  68.00  from holding Federated Max Cap Index or generate 8.68% return on investment over 90 days.

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

Federated Fund For  vs.  Federated Max Cap Index

Federated Fund For

Risk-Adjusted Performance

0 of 100

Very Weak

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

Federated Max Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Max Cap Index are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Federated Max may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Federated Fund and Federated Max

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

The idea behind Federated Fund For and Federated Max Cap Index 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.