Correlation Between Federated Global and Prudential Balanced
Can any of the company-specific risk be diversified away by investing in both Federated Global and Prudential Balanced 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 Global and Prudential Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Global Allocation and Prudential Balanced, you can compare the effects of market volatilities on Federated Global and Prudential Balanced 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 Global with a short position of Prudential Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Global and Prudential Balanced.
Diversification Opportunities for Federated Global and Prudential Balanced
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Federated and Prudential is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Federated Global Allocation and Prudential Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Balanced and Federated Global 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 Global Allocation are associated (or correlated) with Prudential Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Balanced has no effect on the direction of Federated Global i.e., Federated Global and Prudential Balanced go up and down completely randomly.
Pair Corralation between Federated Global and Prudential Balanced
Assuming the 90 days horizon Federated Global is expected to generate 1.14 times less return on investment than Prudential Balanced. But when comparing it to its historical volatility, Federated Global Allocation is 1.12 times less risky than Prudential Balanced. It trades about 0.35 of its potential returns per unit of risk. Prudential Balanced is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 1,665 in Prudential Balanced on April 23, 2025 and sell it today you would earn a total of 184.00 from holding Prudential Balanced or generate 11.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.39% |
| Values | Daily Returns |
Federated Global Allocation vs. Prudential Balanced
Performance |
| Timeline |
| Federated Global All |
| Prudential Balanced |
Federated Global and Prudential Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Global and Prudential Balanced
The main advantage of trading using opposite Federated Global and Prudential Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Global position performs unexpectedly, Prudential Balanced 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 Prudential Balanced will offset losses from the drop in Prudential Balanced's long position.| Federated Global vs. Federated Max Cap Index | Federated Global vs. Federated Kaufmann Fund | Federated Global vs. Federated Strategic Income | Federated Global vs. Federated Bond Fund |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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