Correlation Between Vanguard and Federated Hermes
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP Small Cap and Federated Hermes ETF, you can compare the effects of market volatilities on Vanguard 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 with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Federated Hermes.
Diversification Opportunities for Vanguard and Federated Hermes
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Federated is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and Federated Hermes ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes ETF and Vanguard 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 SP Small 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 ETF has no effect on the direction of Vanguard i.e., Vanguard and Federated Hermes go up and down completely randomly.
Pair Corralation between Vanguard and Federated Hermes
Given the investment horizon of 90 days Vanguard is expected to generate 1.3 times less return on investment than Federated Hermes. In addition to that, Vanguard is 1.04 times more volatile than Federated Hermes ETF. It trades about 0.04 of its total potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.06 per unit of volatility. If you would invest 2,597 in Federated Hermes ETF on October 26, 2024 and sell it today you would earn a total of 104.00 from holding Federated Hermes ETF or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP Small Cap vs. Federated Hermes ETF
Performance |
| Timeline |
| Vanguard SP Small |
| Federated Hermes ETF |
Vanguard and Federated Hermes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and Federated Hermes
The main advantage of trading using opposite Vanguard and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard Russell 2000 | Vanguard vs. Vanguard SP Small Cap |
| Federated Hermes vs. Dimensional ETF Trust | Federated Hermes vs. Vanguard Small Cap Index | Federated Hermes vs. First Trust Multi Manager | Federated Hermes vs. Vanguard SP Small Cap |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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