Correlation Between Microsoft and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Federated Hermes Emerging, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Federated Hermes.
Diversification Opportunities for Microsoft and Federated Hermes
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Federated is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Federated Hermes go up and down completely randomly.
Pair Corralation between Microsoft and Federated Hermes
Given the investment horizon of 90 days Microsoft is expected to generate 1.28 times more return on investment than Federated Hermes. However, Microsoft is 1.28 times more volatile than Federated Hermes Emerging. It trades about 0.07 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 32,373 in Microsoft on August 26, 2024 and sell it today you would earn a total of 9,327 from holding Microsoft or generate 28.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Federated Hermes Emerging
Performance |
| Timeline |
| Microsoft |
| Federated Hermes Emerging |
Microsoft and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Federated Hermes
The main advantage of trading using opposite Microsoft and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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