Correlation Between Stone Ridge and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Federated Hermes Conservative, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Federated Hermes.
Diversification Opportunities for Stone Ridge and Federated Hermes
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stone and Federated is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified 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 Stone Ridge 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 Stone Ridge Diversified 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 Stone Ridge i.e., Stone Ridge and Federated Hermes go up and down completely randomly.
Pair Corralation between Stone Ridge and Federated Hermes
Assuming the 90 days horizon Stone Ridge is expected to generate 1.06 times less return on investment than Federated Hermes. In addition to that, Stone Ridge is 1.65 times more volatile than Federated Hermes Conservative. It trades about 0.13 of its total potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.22 per unit of volatility. If you would invest 997.00 in Federated Hermes Conservative on October 22, 2024 and sell it today you would earn a total of 4.00 from holding Federated Hermes Conservative or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Federated Hermes Conservative
Performance |
| Timeline |
| Stone Ridge Diversified |
| Federated Hermes Con |
Stone Ridge and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Federated Hermes
The main advantage of trading using opposite Stone Ridge and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Virtus Multi Sector Short | Stone Ridge vs. Delaware Investments Ultrashort | Stone Ridge vs. Transamerica Short Term Bond | Stone Ridge vs. Oakhurst Short Duration |
| Federated Hermes vs. Tax Managed Mid Small | Federated Hermes vs. Shelton Funds | Federated Hermes vs. Predex Funds | Federated Hermes vs. Growth Fund Of |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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