Correlation Between Federated and Federated Clover

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

By analyzing existing cross correlation between Federated Gov Sec and Federated Clover Small, you can compare the effects of market volatilities on Federated and Federated Clover 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 Federated Clover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated and Federated Clover.

Diversification Opportunities for Federated and Federated Clover

0.6

Correlation Coefficient

Federated  Federated Clover

Poor diversification

The 3 months correlation between Federated and Federated is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small 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 Gov Sec are associated (or correlated) with Federated Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of Federated i.e., Federated and Federated Clover go up and down completely randomly.

Pair Corralation between Federated and Federated Clover

Assuming the 90 days horizon Federated is expected to generate 25.86 times less return on investment than Federated Clover. But when comparing it to its historical volatility, Federated Gov Sec is 10.22 times less risky than Federated Clover. It trades about 0.05 of its potential returns per unit of risk. Federated Clover Small is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,979  in Federated Clover Small on May 2, 2025 and sell it today you would earn a total of  158.00  from holding Federated Clover Small or generate 7.98% return on investment over 90 days.

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

Federated Gov Sec  vs.  Federated Clover Small

Federated Gov Sec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Gov Sec are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Federated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Clover Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Clover Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Federated Clover may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Federated and Federated Clover

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

The idea behind Federated Gov Sec and Federated Clover Small 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..