Correlation Between Multimanager Lifestyle and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Multimanager Lifestyle 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 Multimanager Lifestyle and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multimanager Lifestyle Aggressive and Federated Hermes Emerging, you can compare the effects of market volatilities on Multimanager Lifestyle 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 Multimanager Lifestyle with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Federated Hermes.
Diversification Opportunities for Multimanager Lifestyle and Federated Hermes
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Multimanager and Federated is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and Federated Hermes Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Emerging and Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive 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 Emerging has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Federated Hermes go up and down completely randomly.
Pair Corralation between Multimanager Lifestyle and Federated Hermes
Assuming the 90 days horizon Multimanager Lifestyle Aggressive is expected to generate 0.77 times more return on investment than Federated Hermes. However, Multimanager Lifestyle Aggressive is 1.31 times less risky than Federated Hermes. It trades about 0.09 of its potential returns per unit of risk. Federated Hermes Emerging is currently generating about 0.04 per unit of risk. If you would invest 1,226 in Multimanager Lifestyle Aggressive on September 12, 2024 and sell it today you would earn a total of 324.00 from holding Multimanager Lifestyle Aggressive or generate 26.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multimanager Lifestyle Aggress vs. Federated Hermes Emerging
Performance |
| Timeline |
| Multimanager Lifestyle |
| Federated Hermes Emerging |
Multimanager Lifestyle and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multimanager Lifestyle and Federated Hermes
The main advantage of trading using opposite Multimanager Lifestyle and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimanager Lifestyle 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.The idea behind Multimanager Lifestyle Aggressive and Federated Hermes Emerging 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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