Correlation Between Federated Mdt and Home Depot

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Can any of the company-specific risk be diversified away by investing in both Federated Mdt and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Mdt Small and Home Depot, you can compare the effects of market volatilities on Federated Mdt and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Mdt and Home Depot.

Diversification Opportunities for Federated Mdt and Home Depot

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Federated and Home Depot is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Mdt Small and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Small are associated (or correlated) with Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Federated Mdt i.e., Federated Mdt and Home Depot go up and down completely randomly.

Pair Corralation between Federated Mdt and Home Depot

Assuming the 90 days horizon Federated Mdt Small is expected to generate 1.08 times more return on investment than Home Depot. However, Federated Mdt is 1.08 times more volatile than Home Depot. It trades about 0.01 of its potential returns per unit of risk. Home Depot is currently generating about 0.01 per unit of risk. If you would invest  1,780  in Federated Mdt Small on June 27, 2022 and sell it today you would earn a total of  24.00  from holding Federated Mdt Small or generate 1.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Federated Mdt Small  vs.  Home Depot

 Performance (%) 
       Timeline  
Federated Mdt Small 
Federated Performance
0 of 100
Over the last 90 days Federated Mdt Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Federated Price Channel

Home Depot 
Home Depot Performance
0 of 100
Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Federated Mdt and Home Depot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Federated Mdt and Home Depot

The main advantage of trading using opposite Federated Mdt and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Mdt position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.
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The idea behind Federated Mdt Small and Home Depot 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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