Correlation Between Federated International and Federated Hermes

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

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

Diversification Opportunities for Federated International and Federated Hermes

0.52

Correlation Coefficient

Federated International  Federated Hermes

Very weak diversification

The 3 months correlation between Federated and Federated is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Federated International Leader and Federated Hermes Ultrashort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Ult and Federated International 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 International Leaders 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 Ult has no effect on the direction of Federated International i.e., Federated International and Federated Hermes go up and down completely randomly.

Pair Corralation between Federated International and Federated Hermes

Assuming the 90 days horizon Federated International Leaders is expected to generate 8.21 times more return on investment than Federated Hermes. However, Federated International is 8.21 times more volatile than Federated Hermes Ultrashort. It trades about 0.13 of its potential returns per unit of risk. Federated Hermes Ultrashort is currently generating about 0.22 per unit of risk. If you would invest  3,677  in Federated International Leaders on November 29, 2024 and sell it today you would earn a total of  237.00  from holding Federated International Leaders or generate 6.45% return on investment over 90 days.

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

Federated International Leader  vs.  Federated Hermes Ultrashort

Federated International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated International Leaders are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Federated Hermes Ult

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Ultrashort are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 Federated International and Federated Hermes

The main advantage of trading using opposite Federated International and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated International 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 Federated International Leaders and Federated Hermes Ultrashort 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.