Correlation Between Federated Hermes and Optimum Small
Can any of the company-specific risk be diversified away by investing in both Federated Hermes and Optimum Small 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 Optimum Small 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 Optimum Small Mid Cap, you can compare the effects of market volatilities on Federated Hermes and Optimum Small 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 Optimum Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and Optimum Small.
Diversification Opportunities for Federated Hermes and Optimum Small
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and Optimum is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes Conservative and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid 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 Optimum Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Federated Hermes i.e., Federated Hermes and Optimum Small go up and down completely randomly.
Pair Corralation between Federated Hermes and Optimum Small
Assuming the 90 days horizon Federated Hermes is expected to generate 4.76 times less return on investment than Optimum Small. But when comparing it to its historical volatility, Federated Hermes Conservative is 11.31 times less risky than Optimum Small. It trades about 0.22 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 563.00 in Optimum Small Mid Cap on September 14, 2024 and sell it today you would earn a total of 169.00 from holding Optimum Small Mid Cap or generate 30.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Hermes Conservative vs. Optimum Small Mid Cap
Performance |
| Timeline |
| Federated Hermes Con |
| Optimum Small Mid |
Federated Hermes and Optimum Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Hermes and Optimum Small
The main advantage of trading using opposite Federated Hermes and Optimum Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Hermes position performs unexpectedly, Optimum Small 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 Optimum Small will offset losses from the drop in Optimum Small's long position.The idea behind Federated Hermes Conservative and Optimum Small Mid Cap 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.
| Optimum Small vs. Federated Hermes Conservative | Optimum Small vs. Tax Free Conservative Income | Optimum Small vs. Calvert Conservative Allocation | Optimum Small vs. Prudential Core Conservative |
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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