Correlation Between International Government and Federated High
Can any of the company-specific risk be diversified away by investing in both International Government and Federated High 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 International Government and Federated High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Government Bond and Federated High Yield, you can compare the effects of market volatilities on International Government and Federated High 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 International Government with a short position of Federated High. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Government and Federated High.
Diversification Opportunities for International Government and Federated High
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between International and Federated is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding International Government Bond and Federated High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated High Yield and International 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 International Government Bond are associated (or correlated) with Federated High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated High Yield has no effect on the direction of International Government i.e., International Government and Federated High go up and down completely randomly.
Pair Corralation between International Government and Federated High
Assuming the 90 days horizon International Government is expected to generate 2.57 times less return on investment than Federated High. In addition to that, International Government is 1.4 times more volatile than Federated High Yield. It trades about 0.1 of its total potential returns per unit of risk. Federated High Yield is currently generating about 0.36 per unit of volatility. If you would invest 613.00 in Federated High Yield on April 22, 2025 and sell it today you would earn a total of 33.00 from holding Federated High Yield or generate 5.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Government Bond vs. Federated High Yield
Performance |
| Timeline |
| International Government |
| Federated High Yield |
International Government and Federated High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Government and Federated High
The main advantage of trading using opposite International Government and Federated High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Government position performs unexpectedly, Federated High 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 High will offset losses from the drop in Federated High's long position.| International Government vs. Mid Cap Index | International Government vs. Mid Cap Strategic | International Government vs. Valic Company I | International Government vs. Valic Company I |
| Federated High vs. Prudential Qma Large Cap | Federated High vs. Profunds Large Cap Growth | Federated High vs. Nuveen Large Cap | Federated High vs. Qs Large Cap |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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