Correlation Between Federated Premier and Brightsphere Investment

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

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

Diversification Opportunities for Federated Premier and Brightsphere Investment

-0.31

Correlation Coefficient

Federated Premier  Brightsphere Investment

Very good diversification

The 3 months correlation between Federated and Brightsphere is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Federated Premier Municipal and Brightsphere Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brightsphere Investment and Federated Premier 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 Premier Municipal are associated (or correlated) with Brightsphere Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brightsphere Investment has no effect on the direction of Federated Premier i.e., Federated Premier and Brightsphere Investment go up and down completely randomly.

Pair Corralation between Federated Premier and Brightsphere Investment

Considering the 90-day investment horizon Federated Premier is expected to generate 3.93 times less return on investment than Brightsphere Investment. But when comparing it to its historical volatility, Federated Premier Municipal is 3.56 times less risky than Brightsphere Investment. It trades about 0.09 of its potential returns per unit of risk. Brightsphere Investment Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,067  in Brightsphere Investment Group on February 5, 2024 and sell it today you would earn a total of  189.00  from holding Brightsphere Investment Group or generate 9.14% return on investment over 90 days.

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

Federated Premier Municipal  vs.  Brightsphere Investment Group

Federated Premier

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brightsphere Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brightsphere Investment Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Brightsphere Investment may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Federated Premier and Brightsphere Investment

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

The idea behind Federated Premier Municipal and Brightsphere Investment Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.