Correlation Between Sarofim Equity and Federated Total

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

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

Diversification Opportunities for Sarofim Equity and Federated Total

-0.44

Correlation Coefficient

Sarofim Equity  Federated Total

Very good diversification

The 3 months correlation between Sarofim and Federated is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sarofim Equity and Federated Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Total Return and Sarofim Equity 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 Sarofim Equity are associated (or correlated) with Federated Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Total Return has no effect on the direction of Sarofim Equity i.e., Sarofim Equity and Federated Total go up and down completely randomly.

Pair Corralation between Sarofim Equity and Federated Total

Assuming the 90 days horizon Sarofim Equity is expected to generate 2.39 times more return on investment than Federated Total. However, Sarofim Equity is 2.39 times more volatile than Federated Total Return. It trades about 0.11 of its potential returns per unit of risk. Federated Total Return is currently generating about -0.07 per unit of risk. If you would invest  1,647  in Sarofim Equity on September 4, 2024 and sell it today you would earn a total of  77.00  from holding Sarofim Equity or generate 4.68% return on investment over 90 days.

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

Sarofim Equity  vs.  Federated Total Return

Sarofim Equity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sarofim Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Sarofim Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sarofim Equity and Federated Total

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

The idea behind Sarofim Equity and Federated Total Return 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.