because it's a federation. i.e. a loose association of formally sovereign units joined together for instrumental, as opposed to strong, binding strategical, ideological or political reasons.
You got that backwards and reasoning is wrong, somewhat.
A federation or confederation refers to how government bodies relate to each other between supposedly sovereign powers.
A Federation is a strong centralized government where the the federal government has final say, more or less
A Confederation is strong decentralized government where the federal government is more just a rep to the rest of the world, but has no power internally. Each "sovereign" state within the confederation is responsible for its laws, currency, and military.
The reasons for forming either are the same. The primary factor though as to why create a Confed rather than a fed is how much opposition there is to centralized authority.
Mostly this is correct. However, you misuse the word 'sovereign'. The difference is that in a confederation, the confederal units remain sovereign; in a federation, they cede their sovereignty to the central authority.
It should be noted I know of no confederations that have ever worked, but then, I only know 2, maybe 3, actual confederations in history. There are various bodies that are similar to confederation, but there are just slight things that make them not, such as Canada and Britain. The 3 I know of are The USA before the Constitution was written, The Confederate States of America. The Greek City-States. The first 2 failed or was conquered quickly. The last one I'm not sure how if you'd consider that really a confederacy considering they warred on each other all the time.
Here you go a bit off the rails.
First, there have been dozens of confederations, though it's usually an exploratory stage in investigating the possibility of a union, so it's generally temporary.
Second, Canada is a plain federation, while Britain is at the completely opposite end of the spectrum from a confederation. Britain is a unitary state, meaning that all authority rests with the parliament in westminster, which can do (in theory, of course) whatever the hell it likes. In recent years, Britain has explored a degree of devolution, whereby decisions are made by regional bodies - but these decisions can be ignored or reversed, and the bodies themselves abolished, by Parliament. (again, in theory - in practice there'd have to be very good reasons, or else there'd be a massive outcry).
The Greek city-states were never, to my knowledge, united at all. Various combinations of them did form various leagues, but (again, so far as I know) these were jus alliances, not confederations (maybe there were confederal elements right at the very end?).
Major long-lasting confederations include the Kalmar Union, Denmark-Norway, Sweden-Norway, Poland-Lithuania, and the Crown of Aragon. The two classic examples, however, would probably be the United Provinces and the Old Swiss Confederacy (which lasted almost 700 years). Native American groups also frequently used this structure (and some still do). You should also be aware of Serbia-Montenegro, which was short-lived but very recent, and fairly high-profile.
Switzerland still calls itself a confederation, but it isn't really. Nonetheless, it is still sometimes called a confederation, to emphasise its very high level of cantonal power, compared to conventional federations. The European Union has also been considered a confederation, although nobody really knows what it is.
But the river tripped on her by and by, lapping
as though her heart was brook: Why, why, why! Weh, O weh
I'se so silly to be flowing but I no canna stay!