Correlation Between Federated Hermes and Franklin Small

Can any of the company-specific risk be diversified away by investing in both Federated Hermes and Franklin Small 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 Small 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 Small Mid Cap, you can compare the effects of market volatilities on Federated Hermes and Franklin Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and Franklin Small.

Diversification Opportunities for Federated Hermes and Franklin Small

0.75

Correlation Coefficient

Federated Hermes  Franklin Small

Poor diversification

The 3 months correlation between Federated and Franklin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes Conservative and Franklin Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Small Mid 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Small Mid has no effect on the direction of Federated Hermes i.e., Federated Hermes and Franklin Small go up and down completely randomly.

Pair Corralation between Federated Hermes and Franklin Small

Assuming the 90 days horizon Federated Hermes is expected to generate 4.0 times less return on investment than Franklin Small. But when comparing it to its historical volatility, Federated Hermes Conservative is 9.5 times less risky than Franklin Small. It trades about 0.22 of its potential returns per unit of risk. Franklin Small Mid Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,793  in Franklin Small Mid Cap on September 23, 2024 and sell it today you would earn a total of  951.00  from holding Franklin Small Mid Cap or generate 25.07% return on investment over 90 days.

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

Federated Hermes Conservative  vs.  Franklin Small Mid Cap

Federated Hermes Con

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Conservative are ranked lower than 11 (%) 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 Small Mid

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Small Mid Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin Small 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 Small

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

The idea behind Federated Hermes Conservative and Franklin Small Mid Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.