Correlation Between Optimum Small and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Optimum Small 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 Optimum Small and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optimum Small Mid Cap and Federated Hermes Conservative, you can compare the effects of market volatilities on Optimum Small 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 Optimum Small with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optimum Small and Federated Hermes.
Diversification Opportunities for Optimum Small and Federated Hermes
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Optimum and Federated is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Optimum Small Mid Cap and Federated Hermes Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Con and Optimum Small 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 Optimum Small Mid Cap 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 Con has no effect on the direction of Optimum Small i.e., Optimum Small and Federated Hermes go up and down completely randomly.
Pair Corralation between Optimum Small and Federated Hermes
Assuming the 90 days horizon Optimum Small Mid Cap is expected to generate 11.31 times more return on investment than Federated Hermes. However, Optimum Small is 11.31 times more volatile than Federated Hermes Conservative. It trades about 0.09 of its potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.22 per unit of risk. If you would invest 563.00 in Optimum Small Mid Cap on September 14, 2024 and sell it today you would earn a total of 169.00 from holding Optimum Small Mid Cap or generate 30.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Optimum Small Mid Cap vs. Federated Hermes Conservative
Performance |
| Timeline |
| Optimum Small Mid |
| Federated Hermes Con |
Optimum Small and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optimum Small and Federated Hermes
The main advantage of trading using opposite Optimum Small and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optimum Small 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.| Optimum Small vs. Federated Hermes Conservative | Optimum Small vs. Tax Free Conservative Income | Optimum Small vs. Calvert Conservative Allocation | Optimum Small vs. Prudential Core Conservative |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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