Correlation Between Federated Government and Angel Oak

Can any of the company-specific risk be diversified away by investing in both Federated Government and Angel Oak 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 Angel Oak 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 Angel Oak Ultrashort, you can compare the effects of market volatilities on Federated Government and Angel Oak 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 Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Angel Oak.

Diversification Opportunities for Federated Government and Angel Oak

0.8

Correlation Coefficient

Federated Government  Angel Oak

Very poor diversification

The 3 months correlation between Federated and Angel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Angel Oak Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Ultrashort 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Ultrashort has no effect on the direction of Federated Government i.e., Federated Government and Angel Oak go up and down completely randomly.

Pair Corralation between Federated Government and Angel Oak

Assuming the 90 days horizon Federated Government is expected to generate 1.17 times less return on investment than Angel Oak. In addition to that, Federated Government is 1.05 times more volatile than Angel Oak Ultrashort. It trades about 0.19 of its total potential returns per unit of risk. Angel Oak Ultrashort is currently generating about 0.24 per unit of volatility. If you would invest  868.00  in Angel Oak Ultrashort on February 18, 2025 and sell it today you would earn a total of  114.00  from holding Angel Oak Ultrashort or generate 13.13% return on investment over 90 days.

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

Federated Government Ultrashor  vs.  Angel Oak Ultrashort

Federated Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Government Ultrashort are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Angel Oak Ultrashort

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Ultrashort are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Government and Angel Oak

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

The idea behind Federated Government Ultrashort and Angel Oak Ultrashort 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.

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.