Correlation Between Federated Emerging and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Federated Emerging 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 Emerging 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 Emerging Market and Federated Hermes Emerging, you can compare the effects of market volatilities on Federated Emerging 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 Emerging with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Emerging and Federated Hermes.
Diversification Opportunities for Federated Emerging and Federated Hermes
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Federated and Federated is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Federated Emerging Market 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 Emerging 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 Emerging Market 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 Emerging i.e., Federated Emerging and Federated Hermes go up and down completely randomly.
Pair Corralation between Federated Emerging and Federated Hermes
Assuming the 90 days horizon Federated Emerging Market is expected to generate 0.39 times more return on investment than Federated Hermes. However, Federated Emerging Market is 2.59 times less risky than Federated Hermes. It trades about 0.1 of its potential returns per unit of risk. Federated Hermes Emerging is currently generating about 0.04 per unit of risk. If you would invest 650.00 in Federated Emerging Market on August 26, 2024 and sell it today you would earn a total of 136.00 from holding Federated Emerging Market or generate 20.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Emerging Market vs. Federated Hermes Emerging
Performance |
| Timeline |
| Federated Emerging Market |
| Federated Hermes Emerging |
Federated Emerging and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Emerging and Federated Hermes
The main advantage of trading using opposite Federated Emerging and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Emerging 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.| Federated Emerging vs. Federated Mdt All | Federated Emerging vs. Federated Mdt Balanced | Federated Emerging vs. Federated Global Allocation | Federated Emerging vs. Federated Hermes Emerging |
| Federated Hermes vs. Federated Emerging Market | Federated Hermes vs. Federated Mdt All | Federated Hermes vs. Federated Mdt Balanced | Federated Hermes vs. Federated Global Allocation |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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