Correlation Between Federated Government and Wesmark Government
Can any of the company-specific risk be diversified away by investing in both Federated Government and Wesmark Government 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 Wesmark Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Income and Wesmark Government Bond, you can compare the effects of market volatilities on Federated Government and Wesmark Government 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 Wesmark Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Wesmark Government.
Diversification Opportunities for Federated Government and Wesmark Government
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federated and Wesmark is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Income and Wesmark Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesmark Government Bond 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 Income are associated (or correlated) with Wesmark Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesmark Government Bond has no effect on the direction of Federated Government i.e., Federated Government and Wesmark Government go up and down completely randomly.
Pair Corralation between Federated Government and Wesmark Government
Assuming the 90 days horizon Federated Government Income is expected to under-perform the Wesmark Government. In addition to that, Federated Government is 1.1 times more volatile than Wesmark Government Bond. It trades about -0.05 of its total potential returns per unit of risk. Wesmark Government Bond is currently generating about -0.03 per unit of volatility. If you would invest 800.00 in Wesmark Government Bond on September 13, 2025 and sell it today you would lose (1.00) from holding Wesmark Government Bond or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Income vs. Wesmark Government Bond
Performance |
| Timeline |
| Federated Government |
| Wesmark Government Bond |
Federated Government and Wesmark Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and Wesmark Government
The main advantage of trading using opposite Federated Government and Wesmark Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government position performs unexpectedly, Wesmark Government 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 Wesmark Government will offset losses from the drop in Wesmark Government's long position.The idea behind Federated Government Income and Wesmark Government Bond 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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