Correlation Between Dimensional Small and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Dimensional Small 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 Dimensional Small and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional Small Cap and Federated Hermes ETF, you can compare the effects of market volatilities on Dimensional Small 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 Dimensional Small with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and Federated Hermes.
Diversification Opportunities for Dimensional Small and Federated Hermes
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Dimensional and Federated is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and Federated Hermes ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes ETF and Dimensional Small 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 Dimensional Small Cap 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 ETF has no effect on the direction of Dimensional Small i.e., Dimensional Small and Federated Hermes go up and down completely randomly.
Pair Corralation between Dimensional Small and Federated Hermes
Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.0 times more return on investment than Federated Hermes. However, Dimensional Small Cap is 1.0 times less risky than Federated Hermes. It trades about 0.32 of its potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.27 per unit of risk. If you would invest 6,391 in Dimensional Small Cap on September 1, 2024 and sell it today you would earn a total of 678.00 from holding Dimensional Small Cap or generate 10.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dimensional Small Cap vs. Federated Hermes ETF
Performance |
| Timeline |
| Dimensional Small Cap |
| Federated Hermes ETF |
Dimensional Small and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional Small and Federated Hermes
The main advantage of trading using opposite Dimensional Small and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional Small 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.| Dimensional Small vs. Dimensional Targeted Value | Dimensional Small vs. Dimensional Equity ETF | Dimensional Small vs. Dimensional Core Equity | Dimensional Small vs. Dimensional International Core |
| Federated Hermes vs. Schwab Fundamental Large | Federated Hermes vs. Schwab Fundamental International | Federated Hermes vs. Schwab Fundamental International | Federated Hermes vs. Schwab Fundamental Emerging |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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