Correlation Between Federated Hermes and Collaborative Investment

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

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

Diversification Opportunities for Federated Hermes and Collaborative Investment

0.24

Correlation Coefficient

Federated Hermes  Collaborative Investment

Modest diversification

The 3 months correlation between Federated and Collaborative is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes ETF and Collaborative Investment Serie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collaborative Investment and Federated Hermes 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 Federated Hermes ETF are associated (or correlated) with Collaborative Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collaborative Investment has no effect on the direction of Federated Hermes i.e., Federated Hermes and Collaborative Investment go up and down completely randomly.

Pair Corralation between Federated Hermes and Collaborative Investment

Given the investment horizon of 90 days Federated Hermes is expected to generate 1.68 times less return on investment than Collaborative Investment. But when comparing it to its historical volatility, Federated Hermes ETF is 4.95 times less risky than Collaborative Investment. It trades about 0.23 of its potential returns per unit of risk. Collaborative Investment Series is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,859  in Collaborative Investment Series on September 5, 2024 and sell it today you would earn a total of  80.00  from holding Collaborative Investment Series or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Federated Hermes ETF  vs.  Collaborative Investment Serie

Federated Hermes ETF

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes ETF are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Federated Hermes is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Collaborative Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Collaborative Investment Series are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Collaborative Investment is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Hermes and Collaborative Investment

The main advantage of trading using opposite Federated Hermes and Collaborative Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Hermes position performs unexpectedly, Collaborative Investment 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 Collaborative Investment will offset losses from the drop in Collaborative Investment's long position.

The idea behind Federated Hermes ETF and Collaborative Investment Series 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.

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.