Correlation Between Federated Hermes and Franklin California

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

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

Diversification Opportunities for Federated Hermes and Franklin California

-0.14

Correlation Coefficient

Federated Hermes  Franklin California

Good diversification

The 3 months correlation between Federated and Franklin is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes Conservative and Franklin California High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin California High and Federated Hermes 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 Hermes Conservative are associated (or correlated) with Franklin California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin California High has no effect on the direction of Federated Hermes i.e., Federated Hermes and Franklin California go up and down completely randomly.

Pair Corralation between Federated Hermes and Franklin California

Assuming the 90 days horizon Federated Hermes Conservative is expected to generate 0.18 times more return on investment than Franklin California. However, Federated Hermes Conservative is 5.6 times less risky than Franklin California. It trades about 0.13 of its potential returns per unit of risk. Franklin California High is currently generating about -0.06 per unit of risk. If you would invest  997.00  in Federated Hermes Conservative on October 10, 2024 and sell it today you would earn a total of  4.00  from holding Federated Hermes Conservative or generate 0.4% return on investment over 90 days.

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

Federated Hermes Conservative  vs.  Franklin California High

Federated Hermes Con

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Conservative are ranked lower than 10 (%) 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.

Franklin California High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin California High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin California 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 Hermes and Franklin California

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

The idea behind Federated Hermes Conservative and Franklin California High 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.