Correlation Between Federated Hermes and First Trust
Can any of the company-specific risk be diversified away by investing in both Federated Hermes and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Hermes ETF and First Trust Consumer, you can compare the effects of market volatilities on Federated Hermes and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and First Trust.
Diversification Opportunities for Federated Hermes and First Trust
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes ETF and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer 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 ETF are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Consumer has no effect on the direction of Federated Hermes i.e., Federated Hermes and First Trust go up and down completely randomly.
Pair Corralation between Federated Hermes and First Trust
Given the investment horizon of 90 days Federated Hermes ETF is expected to generate 1.9 times more return on investment than First Trust. However, Federated Hermes is 1.9 times more volatile than First Trust Consumer. It trades about 0.08 of its potential returns per unit of risk. First Trust Consumer is currently generating about -0.09 per unit of risk. If you would invest 2,546 in Federated Hermes ETF on October 25, 2024 and sell it today you would earn a total of 155.00 from holding Federated Hermes ETF or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Hermes ETF vs. First Trust Consumer
Performance |
| Timeline |
| Federated Hermes ETF |
| First Trust Consumer |
Federated Hermes and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Hermes and First Trust
The main advantage of trading using opposite Federated Hermes and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Hermes position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Federated Hermes vs. Dimensional ETF Trust | Federated Hermes vs. Vanguard Small Cap Index | Federated Hermes vs. First Trust Multi Manager | Federated Hermes vs. Vanguard SP Small Cap |
| First Trust vs. First Trust Consumer | First Trust vs. First Trust Health | First Trust vs. First Trust Utilities | First Trust vs. First Trust IndustrialsProducer |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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