Correlation Between Dimensional ETF and Federated Hermes

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

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

Diversification Opportunities for Dimensional ETF and Federated Hermes

0.8

Correlation Coefficient

Dimensional ETF  Federated Hermes

Very poor diversification

The 3 months correlation between Dimensional and Federated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional ETF Trust and Federated Hermes ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes ETF and Dimensional ETF 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 Dimensional ETF Trust 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 ETF has no effect on the direction of Dimensional ETF i.e., Dimensional ETF and Federated Hermes go up and down completely randomly.

Pair Corralation between Dimensional ETF and Federated Hermes

Given the investment horizon of 90 days Dimensional ETF is expected to generate 3.6 times less return on investment than Federated Hermes. But when comparing it to its historical volatility, Dimensional ETF Trust is 1.37 times less risky than Federated Hermes. It trades about 0.05 of its potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,274  in Federated Hermes ETF on October 10, 2024 and sell it today you would earn a total of  25.00  from holding Federated Hermes ETF or generate 1.1% return on investment over 90 days.

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

Dimensional ETF Trust  vs.  Federated Hermes ETF

Dimensional ETF Trust

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Dimensional ETF is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Federated Hermes ETF

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Federated Hermes is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dimensional ETF and Federated Hermes

The main advantage of trading using opposite Dimensional ETF and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional ETF 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 Dimensional ETF Trust and Federated Hermes ETF 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.