Correlation Between Smallcap and Federated Mdt

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

By analyzing existing cross correlation between Smallcap Sp 600 and Federated Mdt Small, you can compare the effects of market volatilities on Smallcap and Federated Mdt 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 Smallcap with a short position of Federated Mdt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap and Federated Mdt.

Diversification Opportunities for Smallcap and Federated Mdt

0.95

Correlation Coefficient

Smallcap  Federated Mdt

Almost no diversification

The 3 months correlation between Smallcap and Federated is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Sp 600 and Federated Mdt Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Small and Smallcap 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 Smallcap Sp 600 are associated (or correlated) with Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Small has no effect on the direction of Smallcap i.e., Smallcap and Federated Mdt go up and down completely randomly.

Pair Corralation between Smallcap and Federated Mdt

Assuming the 90 days horizon Smallcap is expected to generate 1.12 times less return on investment than Federated Mdt. In addition to that, Smallcap is 1.07 times more volatile than Federated Mdt Small. It trades about 0.16 of its total potential returns per unit of risk. Federated Mdt Small is currently generating about 0.19 per unit of volatility. If you would invest  2,688  in Federated Mdt Small on May 24, 2025 and sell it today you would earn a total of  345.00  from holding Federated Mdt Small or generate 12.83% return on investment over 90 days.

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

Smallcap Sp 600  vs.  Federated Mdt Small

Smallcap Sp 600

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Sp 600 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Smallcap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Federated Mdt Small

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Mdt Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Federated Mdt showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smallcap and Federated Mdt

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

The idea behind Smallcap Sp 600 and Federated Mdt 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.