Correlation Between Eafe Fund and Federated Hermes

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

By analyzing existing cross correlation between The Eafe Fund and Federated Hermes Conservative, you can compare the effects of market volatilities on Eafe Fund and Federated Hermes 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 Eafe Fund with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eafe Fund and Federated Hermes.

Diversification Opportunities for Eafe Fund and Federated Hermes

0.1

Correlation Coefficient

Eafe Fund  Federated Hermes

Average diversification

The 3 months correlation between Eafe and Federated is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Eafe Fund and Federated Hermes Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Con and Eafe Fund 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 The Eafe Fund are associated (or correlated) with Federated Hermes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Hermes Con has no effect on the direction of Eafe Fund i.e., Eafe Fund and Federated Hermes go up and down completely randomly.

Pair Corralation between Eafe Fund and Federated Hermes

Assuming the 90 days horizon The Eafe Fund is expected to generate 15.27 times more return on investment than Federated Hermes. However, Eafe Fund is 15.27 times more volatile than Federated Hermes Conservative. It trades about 0.04 of its potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.22 per unit of risk. If you would invest  1,251  in The Eafe Fund on December 29, 2024 and sell it today you would earn a total of  34.00  from holding The Eafe Fund or generate 2.72% return on investment over 90 days.

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

The Eafe Fund  vs.  Federated Hermes Conservative

Eafe Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Eafe Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Eafe Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Hermes Con

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Conservative are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Hermes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eafe Fund and Federated Hermes

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

The idea behind The Eafe Fund and Federated Hermes Conservative 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.