Correlation Between Federated Investors and Carlyle

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

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

Diversification Opportunities for Federated Investors and Carlyle

0.76

Correlation Coefficient

Federated Investors  Carlyle

Poor diversification

The 3 months correlation between Federated and Carlyle is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Federated Investors B and Carlyle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Group and Federated Investors 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 Investors B are associated (or correlated) with Carlyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Group has no effect on the direction of Federated Investors i.e., Federated Investors and Carlyle go up and down completely randomly.

Pair Corralation between Federated Investors and Carlyle

Considering the 90-day investment horizon Federated Investors B is expected to generate 0.45 times more return on investment than Carlyle. However, Federated Investors B is 2.2 times less risky than Carlyle. It trades about -0.04 of its potential returns per unit of risk. Carlyle Group is currently generating about -0.2 per unit of risk. If you would invest  3,291  in Federated Investors B on March 29, 2024 and sell it today you would lose (26.00) from holding Federated Investors B or give up 0.79% of portfolio value over 90 days.

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

Federated Investors B  vs.  Carlyle Group

Federated Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Investors B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Federated Investors is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Carlyle Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlyle Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Federated Investors and Carlyle

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

The idea behind Federated Investors B and Carlyle 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.