Correlation Between Balanced Fund and Federated Pennsylvania

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

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

Diversification Opportunities for Balanced Fund and Federated Pennsylvania

0.38

Correlation Coefficient

Balanced Fund  Federated Pennsylvania

Weak diversification

The 3 months correlation between Balanced and Federated is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Investor and Federated Pennsylvania Municip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Pennsylvania and Balanced 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 Balanced Fund Investor are associated (or correlated) with Federated Pennsylvania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Pennsylvania has no effect on the direction of Balanced Fund i.e., Balanced Fund and Federated Pennsylvania go up and down completely randomly.

Pair Corralation between Balanced Fund and Federated Pennsylvania

Assuming the 90 days horizon Balanced Fund Investor is expected to generate 2.76 times more return on investment than Federated Pennsylvania. However, Balanced Fund is 2.76 times more volatile than Federated Pennsylvania Municipal. It trades about 0.14 of its potential returns per unit of risk. Federated Pennsylvania Municipal is currently generating about 0.39 per unit of risk. If you would invest  2,016  in Balanced Fund Investor on September 12, 2024 and sell it today you would earn a total of  22.00  from holding Balanced Fund Investor or generate 1.09% return on investment over 90 days.

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

Balanced Fund Investor  vs.  Federated Pennsylvania Municip

Balanced Fund Investor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Investor are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Pennsylvania

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Pennsylvania Municipal are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Pennsylvania is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Federated Pennsylvania

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

The idea behind Balanced Fund Investor and Federated Pennsylvania Municipal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.