Correlation Between Federated Fund and Federated Global

Can any of the company-specific risk be diversified away by investing in both Federated Fund and Federated Global 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 Global 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 Global Allocation, you can compare the effects of market volatilities on Federated Fund and Federated Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Fund and Federated Global.

Diversification Opportunities for Federated Fund and Federated Global

-0.2

Correlation Coefficient

Federated Fund  Federated Global

Good diversification

The 3 months correlation between Federated and Federated is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Federated Fund For and Federated Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Global All 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Global All has no effect on the direction of Federated Fund i.e., Federated Fund and Federated Global go up and down completely randomly.

Pair Corralation between Federated Fund and Federated Global

Assuming the 90 days horizon Federated Fund For is expected to under-perform the Federated Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Fund For is 1.36 times less risky than Federated Global. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Federated Global Allocation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,943  in Federated Global Allocation on September 4, 2024 and sell it today you would earn a total of  72.00  from holding Federated Global Allocation or generate 3.71% return on investment over 90 days.

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

Federated Fund For  vs.  Federated Global Allocation

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 Global All

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Global Allocation are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Federated Global 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 Fund and Federated Global

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

The idea behind Federated Fund For and Federated Global Allocation 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.