Correlation Between Federated Short-term and Federated Total

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

By analyzing existing cross correlation between Federated Short Term Income and Federated Total Return, you can compare the effects of market volatilities on Federated Short-term and Federated Total 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 Short-term with a short position of Federated Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Federated Total.

Diversification Opportunities for Federated Short-term and Federated Total

0.83

Correlation Coefficient

Federated Short-term  Federated Total

Very poor diversification

The 3 months correlation between Federated and Federated is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Federated Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Total Return and Federated Short-term 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 Short Term Income are associated (or correlated) with Federated Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Total Return has no effect on the direction of Federated Short-term i.e., Federated Short-term and Federated Total go up and down completely randomly.

Pair Corralation between Federated Short-term and Federated Total

Assuming the 90 days horizon Federated Short Term Income is expected to generate 0.38 times more return on investment than Federated Total. However, Federated Short Term Income is 2.63 times less risky than Federated Total. It trades about 0.17 of its potential returns per unit of risk. Federated Total Return is currently generating about 0.05 per unit of risk. If you would invest  761.00  in Federated Short Term Income on May 3, 2025 and sell it today you would earn a total of  95.00  from holding Federated Short Term Income or generate 12.48% return on investment over 90 days.

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

Federated Short Term Income  vs.  Federated Total Return

Federated Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Term Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Total Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Total Return are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Federated Total 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 Short-term and Federated Total

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

The idea behind Federated Short Term Income and Federated Total Return 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.