Correlation Between Federated Premier and Eaton Vance

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

By analyzing existing cross correlation between Federated Premier Municipal and Eaton Vance National, you can compare the effects of market volatilities on Federated Premier and Eaton Vance 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 Premier with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Premier and Eaton Vance.

Diversification Opportunities for Federated Premier and Eaton Vance

0.9

Correlation Coefficient

Federated Premier  Eaton Vance

Almost no diversification

The 3 months correlation between Federated and Eaton is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Eaton Vance National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance National and Federated Premier 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 Premier Municipal are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance National has no effect on the direction of Federated Premier i.e., Federated Premier and Eaton Vance go up and down completely randomly.

Pair Corralation between Federated Premier and Eaton Vance

Considering the 90-day investment horizon Federated Premier Municipal is expected to generate 0.93 times more return on investment than Eaton Vance. However, Federated Premier Municipal is 1.07 times less risky than Eaton Vance. It trades about -0.07 of its potential returns per unit of risk. Eaton Vance National is currently generating about -0.08 per unit of risk. If you would invest  1,073  in Federated Premier Municipal on January 9, 2025 and sell it today you would lose (34.00) from holding Federated Premier Municipal or give up 3.17% of portfolio value over 90 days.

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

Federated Premier Municipal  vs.  Eaton Vance National

Federated Premier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federated Premier Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Eaton Vance National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eaton Vance National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Federated Premier and Eaton Vance

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

The idea behind Federated Premier Municipal and Eaton Vance National 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.