Correlation Between Federated Kaufmann and Investec Emerging

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

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

Diversification Opportunities for Federated Kaufmann and Investec Emerging

0.43

Correlation Coefficient

Federated Kaufmann  Investec Emerging

Very weak diversification

The 3 months correlation between FEDERATED and Investec is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Federated Kaufmann Large and Investec Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Emerging Markets and Federated Kaufmann 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 Kaufmann Large are associated (or correlated) with Investec Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Emerging Markets has no effect on the direction of Federated Kaufmann i.e., Federated Kaufmann and Investec Emerging go up and down completely randomly.

Pair Corralation between Federated Kaufmann and Investec Emerging

Assuming the 90 days horizon Federated Kaufmann is expected to generate 1.19 times less return on investment than Investec Emerging. In addition to that, Federated Kaufmann is 1.88 times more volatile than Investec Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Investec Emerging Markets is currently generating about 0.06 per unit of volatility. If you would invest  893.00  in Investec Emerging Markets on August 31, 2024 and sell it today you would earn a total of  179.00  from holding Investec Emerging Markets or generate 20.04% return on investment over 90 days.

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

Federated Kaufmann Large  vs.  Investec Emerging Markets

Federated Kaufmann Large

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Large are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Federated Kaufmann may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Investec Emerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Emerging Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Investec Emerging 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 Kaufmann and Investec Emerging

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

The idea behind Federated Kaufmann Large and Investec Emerging Markets 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.