Correlation Between Federated Hermes and Salient Adaptive
Can any of the company-specific risk be diversified away by investing in both Federated Hermes and Salient Adaptive 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 Hermes and Salient Adaptive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Hermes Conservative and Salient Adaptive Equity, you can compare the effects of market volatilities on Federated Hermes and Salient Adaptive 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 Hermes with a short position of Salient Adaptive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and Salient Adaptive.
Diversification Opportunities for Federated Hermes and Salient Adaptive
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Salient is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes Conservative and Salient Adaptive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Adaptive Equity and Federated Hermes 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 Hermes Conservative are associated (or correlated) with Salient Adaptive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Adaptive Equity has no effect on the direction of Federated Hermes i.e., Federated Hermes and Salient Adaptive go up and down completely randomly.
Pair Corralation between Federated Hermes and Salient Adaptive
Assuming the 90 days horizon Federated Hermes is expected to generate 2.41 times less return on investment than Salient Adaptive. But when comparing it to its historical volatility, Federated Hermes Conservative is 2.58 times less risky than Salient Adaptive. It trades about 0.22 of its potential returns per unit of risk. Salient Adaptive Equity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 889.00 in Salient Adaptive Equity on September 14, 2024 and sell it today you would earn a total of 260.00 from holding Salient Adaptive Equity or generate 29.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Federated Hermes Conservative vs. Salient Adaptive Equity
Performance |
| Timeline |
| Federated Hermes Con |
| Salient Adaptive Equity |
Federated Hermes and Salient Adaptive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Hermes and Salient Adaptive
The main advantage of trading using opposite Federated Hermes and Salient Adaptive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Hermes position performs unexpectedly, Salient Adaptive 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 Salient Adaptive will offset losses from the drop in Salient Adaptive's long position.The idea behind Federated Hermes Conservative and Salient Adaptive Equity 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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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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