Correlation Between First Trust and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and Federated Hermes Conservative, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Federated Hermes.
Diversification Opportunities for First Trust and Federated Hermes
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Federated is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty and Federated Hermes Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Con and First Trust 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 First Trust Specialty 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 Con has no effect on the direction of First Trust i.e., First Trust and Federated Hermes go up and down completely randomly.
Pair Corralation between First Trust and Federated Hermes
Considering the 90-day investment horizon First Trust Specialty is expected to generate 10.01 times more return on investment than Federated Hermes. However, First Trust is 10.01 times more volatile than Federated Hermes Conservative. It trades about 0.12 of its potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.24 per unit of risk. If you would invest 281.00 in First Trust Specialty on October 28, 2024 and sell it today you would earn a total of 158.00 from holding First Trust Specialty or generate 56.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. Federated Hermes Conservative
Performance |
| Timeline |
| First Trust Specialty |
| Federated Hermes Con |
First Trust and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Federated Hermes
The main advantage of trading using opposite First Trust and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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