Correlation Between Federated Government and Df Dent

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

By analyzing existing cross correlation between Federated Government Ultrashort and Df Dent Premier, you can compare the effects of market volatilities on Federated Government and Df Dent 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 Government with a short position of Df Dent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and Df Dent.

Diversification Opportunities for Federated Government and Df Dent

-0.8

Correlation Coefficient

Federated Government  Df Dent

Pay attention - limited upside

The 3 months correlation between FEDERATED and DFDPX is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and Df Dent Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Premier and Federated Government 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 Government Ultrashort are associated (or correlated) with Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Premier has no effect on the direction of Federated Government i.e., Federated Government and Df Dent go up and down completely randomly.

Pair Corralation between Federated Government and Df Dent

Assuming the 90 days horizon Federated Government Ultrashort is expected to under-perform the Df Dent. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Government Ultrashort is 21.44 times less risky than Df Dent. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Df Dent Premier is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,501  in Df Dent Premier on February 8, 2025 and sell it today you would earn a total of  171.00  from holding Df Dent Premier or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Federated Government Ultrashor  vs.  Df Dent Premier

Federated Government

Risk-Adjusted Performance

OK

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

Df Dent Premier

Risk-Adjusted Performance

Very Weak

Over the last 90 days Df Dent Premier has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Df Dent 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 Government and Df Dent

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

The idea behind Federated Government Ultrashort and Df Dent Premier 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..