Correlation Between Performance Trust and Federated Equity

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

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

Diversification Opportunities for Performance Trust and Federated Equity

0.66

Correlation Coefficient

Performance Trust  Federated Equity

Poor diversification

The 3 months correlation between Performance and Federated is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Performance Trust Municipal and Federated Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Equity Income and Performance Trust 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 Performance Trust Municipal are associated (or correlated) with Federated Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Equity Income has no effect on the direction of Performance Trust i.e., Performance Trust and Federated Equity go up and down completely randomly.

Pair Corralation between Performance Trust and Federated Equity

Assuming the 90 days horizon Performance Trust is expected to generate 1.34 times less return on investment than Federated Equity. But when comparing it to its historical volatility, Performance Trust Municipal is 2.9 times less risky than Federated Equity. It trades about 0.26 of its potential returns per unit of risk. Federated Equity Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,341  in Federated Equity Income on July 3, 2025 and sell it today you would earn a total of  96.00  from holding Federated Equity Income or generate 4.1% return on investment over 90 days.

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

Performance Trust Municipal  vs.  Federated Equity Income

Performance Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Trust Municipal are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Performance Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Equity Income

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Equity Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Performance Trust and Federated Equity

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

The idea behind Performance Trust Municipal and Federated Equity Income 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.