Correlation Between Arrow Managed and Federated Hermes

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

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

Diversification Opportunities for Arrow Managed and Federated Hermes

-0.58

Correlation Coefficient

Arrow Managed  Federated Hermes

Excellent diversification

The 3 months correlation between Arrow and Federated is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures 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 Arrow Managed 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 Arrow Managed Futures 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 Arrow Managed i.e., Arrow Managed and Federated Hermes go up and down completely randomly.

Pair Corralation between Arrow Managed and Federated Hermes

Assuming the 90 days horizon Arrow Managed is expected to generate 1.7 times less return on investment than Federated Hermes. In addition to that, Arrow Managed is 13.06 times more volatile than Federated Hermes Ultrashort. It trades about 0.01 of its total potential returns per unit of risk. Federated Hermes Ultrashort is currently generating about 0.13 per unit of volatility. If you would invest  920.00  in Federated Hermes Ultrashort on August 31, 2024 and sell it today you would earn a total of  7.00  from holding Federated Hermes Ultrashort or generate 0.76% return on investment over 90 days.

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

Arrow Managed Futures  vs.  Federated Hermes Ultrashort

Arrow Managed Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Arrow Managed 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

10 of 100

OK

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

The main advantage of trading using opposite Arrow Managed and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed 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 Arrow Managed Futures 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.