Correlation Between Dell Technologies and Federated Hermes

Can any of the company-specific risk be diversified away by investing in both Dell Technologies 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 Dell Technologies and Federated Hermes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dell Technologies and Federated Hermes ETF, you can compare the effects of market volatilities on Dell Technologies 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 Dell Technologies with a short position of Federated Hermes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Federated Hermes.

Diversification Opportunities for Dell Technologies and Federated Hermes

0.84

Correlation Coefficient

Dell Technologies  Federated Hermes

Very poor diversification

The 3 months correlation between Dell and Federated is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies 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 Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and Federated Hermes go up and down completely randomly.

Pair Corralation between Dell Technologies and Federated Hermes

Given the investment horizon of 90 days Dell Technologies is expected to under-perform the Federated Hermes. In addition to that, Dell Technologies is 4.3 times more volatile than Federated Hermes ETF. It trades about -0.02 of its total potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.45 per unit of volatility. If you would invest  2,705  in Federated Hermes ETF on September 4, 2024 and sell it today you would earn a total of  204.00  from holding Federated Hermes ETF or generate 7.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Dell Technologies  vs.  Federated Hermes ETF

Dell Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Federated Hermes ETF

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Federated Hermes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dell Technologies and Federated Hermes

The main advantage of trading using opposite Dell Technologies and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies 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.

The idea behind Dell Technologies and Federated Hermes ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.