Correlation Between Federated Government and Absolute Capital
Can any of the company-specific risk be diversified away by investing in both Federated Government and Absolute Capital 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 Government and Absolute Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and Absolute Capital Defender, you can compare the effects of market volatilities on Federated Government and Absolute Capital 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 Government with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Absolute Capital.
Diversification Opportunities for Federated Government and Absolute Capital
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Absolute is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender and Federated Government 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 Government Ultrashort are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Federated Government i.e., Federated Government and Absolute Capital go up and down completely randomly.
Pair Corralation between Federated Government and Absolute Capital
Assuming the 90 days horizon Federated Government is expected to generate 12.93 times less return on investment than Absolute Capital. But when comparing it to its historical volatility, Federated Government Ultrashort is 9.86 times less risky than Absolute Capital. It trades about 0.22 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,120 in Absolute Capital Defender on April 2, 2025 and sell it today you would earn a total of 30.00 from holding Absolute Capital Defender or generate 2.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. Absolute Capital Defender
Performance |
| Timeline |
| Federated Government |
| Absolute Capital Defender |
Federated Government and Absolute Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Absolute Capital
The main advantage of trading using opposite Federated Government and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.| Federated Government vs. Oberweis Emerging Growth | Federated Government vs. Wcm Focused Emerging | Federated Government vs. Doubleline Emerging Markets | Federated Government vs. Dreyfus Global Emerging |
| Absolute Capital vs. Harbor Diversified International | Absolute Capital vs. Pgim Jennison Diversified | Absolute Capital vs. Allianzgi Diversified Income | Absolute Capital vs. Fuller Thaler Behavioral |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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