Correlation Between Federated and Ab Small

Can any of the company-specific risk be diversified away by investing in both Federated and Ab Small 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 and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated U S and Ab Small Cap, you can compare the effects of market volatilities on Federated and Ab Small 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 with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated and Ab Small.

Diversification Opportunities for Federated and Ab Small

0.28

Correlation Coefficient

Federated  Ab Small

Modest diversification

The 3 months correlation between Federated and QUAIX is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Federated U S and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Federated 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 U S are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Federated i.e., Federated and Ab Small go up and down completely randomly.

Pair Corralation between Federated and Ab Small

Assuming the 90 days horizon Federated U S is expected to under-perform the Ab Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated U S is 5.81 times less risky than Ab Small. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Ab Small Cap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,354  in Ab Small Cap on May 1, 2025 and sell it today you would earn a total of  921.00  from holding Ab Small Cap or generate 14.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Federated U S  vs.  Ab Small Cap

Federated U S

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Federated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ab Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federated and Ab Small

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

The idea behind Federated U S and Ab Small Cap 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.