Correlation Between Vanguard 500 and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 Vanguard 500 and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Federated Hermes Conservative, you can compare the effects of market volatilities on Vanguard 500 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 Vanguard 500 with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Federated Hermes.
Diversification Opportunities for Vanguard 500 and Federated Hermes
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Federated is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 Vanguard 500 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 Vanguard 500 Index 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 Vanguard 500 i.e., Vanguard 500 and Federated Hermes go up and down completely randomly.
Pair Corralation between Vanguard 500 and Federated Hermes
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 8.55 times more return on investment than Federated Hermes. However, Vanguard 500 is 8.55 times more volatile than Federated Hermes Conservative. It trades about 0.12 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 47,729 in Vanguard 500 Index on September 3, 2024 and sell it today you would earn a total of 8,050 from holding Vanguard 500 Index or generate 16.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Federated Hermes Conservative
Performance |
| Timeline |
| Vanguard 500 Index |
| Federated Hermes Con |
Vanguard 500 and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Federated Hermes
The main advantage of trading using opposite Vanguard 500 and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Federated Hermes vs. Alpine High Yield | Federated Hermes vs. Ppm High Yield | Federated Hermes vs. American Century High | Federated Hermes vs. Pgim High Yield |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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