Correlation Between Federated Hermes and Franklin

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

By analyzing existing cross correlation between Federated Hermes Sdg and Franklin Government Money, you can compare the effects of market volatilities on Federated Hermes and Franklin 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and Franklin.

Diversification Opportunities for Federated Hermes and Franklin

0.0

Correlation Coefficient

Federated Hermes  Franklin

Pay attention - limited upside

The 3 months correlation between Federated and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes Sdg and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money 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 Sdg are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Federated Hermes i.e., Federated Hermes and Franklin go up and down completely randomly.

Pair Corralation between Federated Hermes and Franklin

Assuming the 90 days horizon Federated Hermes Sdg is expected to generate 0.25 times more return on investment than Franklin. However, Federated Hermes Sdg is 3.94 times less risky than Franklin. It trades about 0.03 of its potential returns per unit of risk. Franklin Government Money is currently generating about -0.03 per unit of risk. If you would invest  1,207  in Federated Hermes Sdg on October 11, 2024 and sell it today you would earn a total of  148.00  from holding Federated Hermes Sdg or generate 12.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Federated Hermes Sdg  vs.  Franklin Government Money

Federated Hermes Sdg

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Federated Hermes Sdg has generated negative risk-adjusted returns adding no value to fund investors. 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 Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Federated Hermes Sdg and Franklin Government Money 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..