Correlation Between American Funds and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Inflation and Federated Hermes Inflation, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Federated Hermes.
Diversification Opportunities for American Funds and Federated Hermes
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Federated is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Federated Hermes Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Inf and American Funds 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 American Funds Inflation 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 Inf has no effect on the direction of American Funds i.e., American Funds and Federated Hermes go up and down completely randomly.
Pair Corralation between American Funds and Federated Hermes
Assuming the 90 days horizon American Funds Inflation is expected to generate 0.91 times more return on investment than Federated Hermes. However, American Funds Inflation is 1.1 times less risky than Federated Hermes. It trades about 0.1 of its potential returns per unit of risk. Federated Hermes Inflation is currently generating about 0.08 per unit of risk. If you would invest 914.00 in American Funds Inflation on September 13, 2024 and sell it today you would earn a total of 30.00 from holding American Funds Inflation or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Federated Hermes Inflation
Performance |
| Timeline |
| American Funds Inflation |
| Federated Hermes Inf |
American Funds and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Federated Hermes
The main advantage of trading using opposite American Funds and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Goldman Sachs Clean | American Funds vs. Great West Goldman Sachs | American Funds vs. Sprott Gold Equity | American Funds vs. Precious Metals And |
| Federated Hermes vs. Gabelli Convertible And | Federated Hermes vs. Putnam Convertible Incm Gwth | Federated Hermes vs. Allianzgi Convertible Income | Federated Hermes vs. Rationalpier 88 Convertible |
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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