Correlation Between Federated Total and Federated Hermes

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

Diversification Opportunities for Federated Total and Federated Hermes

-0.13

Correlation Coefficient

Federated Total  Federated Hermes

Good diversification

The 3 months correlation between Federated and Federated is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return 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 Total 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 Total Return 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 Total i.e., Federated Total and Federated Hermes go up and down completely randomly.

Pair Corralation between Federated Total and Federated Hermes

Assuming the 90 days horizon Federated Total is expected to generate 1.89 times less return on investment than Federated Hermes. In addition to that, Federated Total is 3.93 times more volatile than Federated Hermes Ultrashort. It trades about 0.03 of its total potential returns per unit of risk. Federated Hermes Ultrashort is currently generating about 0.22 per unit of volatility. If you would invest  828.00  in Federated Hermes Ultrashort on November 20, 2024 and sell it today you would earn a total of  100.00  from holding Federated Hermes Ultrashort or generate 12.08% return on investment over 90 days.

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

Federated Total Return  vs.  Federated Hermes Ultrashort

Federated Total Return

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Total Return are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Federated Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 19 (%) 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 Total and Federated Hermes

The main advantage of trading using opposite Federated Total and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Total 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 Total Return 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.