Correlation Between Federated Mdt and DOW

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Federated Mdt and DOW 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 Mdt and DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Mdt Balanced and DOW, you can compare the effects of market volatilities on Federated Mdt and DOW 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 Mdt with a short position of DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Mdt and DOW.

Diversification Opportunities for Federated Mdt and DOW

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Federated and DOW is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Federated Mdt Balanced and DOW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOW and Federated Mdt 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 Mdt Balanced are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Federated Mdt i.e., Federated Mdt and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Federated Mdt and DOW

Assuming the 90 days horizon Federated Mdt Balanced is expected to generate 0.82 times more return on investment than DOW. However, Federated Mdt Balanced is 1.21 times less risky than DOW. It trades about -0.11 of its potential returns per unit of risk. DOW is currently generating about -0.11 per unit of risk. If you would invest  2,011  in Federated Mdt Balanced on March 29, 2022 and sell it today you would lose (118.00)  from holding Federated Mdt Balanced or give up 5.87% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Federated Mdt Balanced  vs.  DOW

 Performance (%) 
      Timeline 

Federated Mdt and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

Federated Mdt Balanced

Pair trading matchups for Federated Mdt

Teucrium Corn vs. Federated Mdt
Macroaxis vs. Federated Mdt
Northrop Grumman vs. Federated Mdt
Chevron Corp vs. Federated Mdt
Verizon Communications vs. Federated Mdt
Conagra Brands vs. Federated Mdt
Merck vs. Federated Mdt
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Federated Mdt as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Federated Mdt's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Federated Mdt's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Federated Mdt Balanced.

DOW

Pair trading matchups for DOW

Macroaxis vs. DOW
Cincinnati Financial vs. DOW
Verizon Communications vs. DOW
Teucrium Corn vs. DOW
Conagra Brands vs. DOW
Merck vs. DOW
Northrop Grumman vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with Federated Mdt and DOW

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

Federated Mdt Balanced

Pair trading matchups for Federated Mdt

Chevron Corp vs. Federated Mdt
Home Depot vs. Federated Mdt
Merck vs. Federated Mdt
Teucrium Corn vs. Federated Mdt
Conagra Brands vs. Federated Mdt
Verizon Communications vs. Federated Mdt
Northrop Grumman vs. Federated Mdt
Micron Technology vs. Federated Mdt
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Federated Mdt as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Federated Mdt's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Federated Mdt's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Federated Mdt Balanced.
The idea behind Federated Mdt Balanced and DOW 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.

DOW

Pair trading matchups for DOW

Chevron Corp vs. DOW
Teucrium Corn vs. DOW
Cincinnati Financial vs. DOW
Verizon Communications vs. DOW
Merck vs. DOW
Conagra Brands vs. DOW
Northrop Grumman vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

Other Complementary Tools

Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go
Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Watchlist Optimization
Optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm
Go