Correlation Between IShares Core and Federated Hermes

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

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

Diversification Opportunities for IShares Core and Federated Hermes

0.96

Correlation Coefficient

IShares Core  Federated Hermes

Almost no diversification

The 3 months correlation between IShares and Federated is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Total 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 IShares Core 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 iShares Core Total 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 IShares Core i.e., IShares Core and Federated Hermes go up and down completely randomly.

Pair Corralation between IShares Core and Federated Hermes

Given the investment horizon of 90 days iShares Core Total is expected to generate 1.05 times more return on investment than Federated Hermes. However, IShares Core is 1.05 times more volatile than Federated Hermes ETF. It trades about 0.2 of its potential returns per unit of risk. Federated Hermes ETF is currently generating about 0.21 per unit of risk. If you would invest  4,554  in iShares Core Total on September 2, 2024 and sell it today you would earn a total of  68.00  from holding iShares Core Total or generate 1.49% return on investment over 90 days.

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

iShares Core Total  vs.  Federated Hermes ETF

iShares Core Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Total has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Hermes ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Hermes ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Federated Hermes is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Federated Hermes

The main advantage of trading using opposite IShares Core and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core Total 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.