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 Smallcap and Federated Hermes Sdg, 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
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Federated is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Smallcap and Federated Hermes Sdg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Sdg 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 Smallcap 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 Sdg 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 Smallcap is expected to generate 1.01 times more return on investment than Federated Hermes. However, American Funds is 1.01 times more volatile than Federated Hermes Sdg. It trades about 0.05 of its potential returns per unit of risk. Federated Hermes Sdg is currently generating about 0.05 per unit of risk. If you would invest 5,808 in American Funds Smallcap on September 4, 2024 and sell it today you would earn a total of 1,406 from holding American Funds Smallcap or generate 24.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Smallcap vs. Federated Hermes Sdg
Performance |
| Timeline |
| American Funds Smallcap |
| Federated Hermes Sdg |
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. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Federated Hermes vs. Federated Emerging Market | Federated Hermes vs. Federated Mdt All | Federated Hermes vs. Federated Mdt Balanced | Federated Hermes vs. Federated Global Allocation |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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