Correlation Between Federated Strategic and Mid Cap

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

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

Diversification Opportunities for Federated Strategic and Mid Cap

0.87

Correlation Coefficient

Federated Strategic  Mid Cap

Very poor diversification

The 3 months correlation between Federated and Mid is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Federated Strategic Income and Mid Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Federated Strategic 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 Strategic Income are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Federated Strategic i.e., Federated Strategic and Mid Cap go up and down completely randomly.

Pair Corralation between Federated Strategic and Mid Cap

Assuming the 90 days horizon Federated Strategic is expected to generate 5.04 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Federated Strategic Income is 5.3 times less risky than Mid Cap. It trades about 0.23 of its potential returns per unit of risk. Mid Cap Growth Profund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,636  in Mid Cap Growth Profund on April 30, 2025 and sell it today you would earn a total of  1,311  from holding Mid Cap Growth Profund or generate 13.61% return on investment over 90 days.

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

Federated Strategic Income  vs.  Mid Cap Growth Profund

Federated Strategic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Strategic Income are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Strategic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Mid Cap Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth Profund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Federated Strategic and Mid Cap

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

The idea behind Federated Strategic Income and Mid Cap Growth Profund 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 Transaction History module to view history of all your transactions and understand their impact on performance.