Correlation Between Federated Gov and Federated Hermes

Can any of the company-specific risk be diversified away by investing in both Federated Gov 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 Gov 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 Gov Sec and Federated Hermes Emerging, you can compare the effects of market volatilities on Federated Gov 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 Gov with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Gov and Federated Hermes.

Diversification Opportunities for Federated Gov and Federated Hermes

0.49

Correlation Coefficient

Federated Gov  Federated Hermes

Very weak diversification

The 3 months correlation between Federated and Federated is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Federated Gov Sec and Federated Hermes Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Emerging and Federated Gov 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 Gov Sec 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 Emerging has no effect on the direction of Federated Gov i.e., Federated Gov and Federated Hermes go up and down completely randomly.

Pair Corralation between Federated Gov and Federated Hermes

Assuming the 90 days horizon Federated Gov Sec is expected to under-perform the Federated Hermes. But the mutual fund apears to be less risky and, when comparing its historical volatility, Federated Gov Sec is 9.2 times less risky than Federated Hermes. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Federated Hermes Emerging is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,522  in Federated Hermes Emerging on October 3, 2024 and sell it today you would lose (8.00) from holding Federated Hermes Emerging or give up 0.53% of portfolio value over 90 days.

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

Federated Gov Sec  vs.  Federated Hermes Emerging

Federated Gov Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Gov Sec has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Federated Gov is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Hermes Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Hermes Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Federated Gov and Federated Hermes

The main advantage of trading using opposite Federated Gov and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Gov 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 Gov Sec and Federated Hermes Emerging 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.