Correlation Between Growth Opportunities and Federated Hermes

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

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

Diversification Opportunities for Growth Opportunities and Federated Hermes

0.08

Correlation Coefficient

Growth Opportunities  Federated Hermes

Significant diversification

The 3 months correlation between GROWTH and Federated is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Federated Hermes Sdg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Sdg and Growth Opportunities 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 Growth Opportunities Fund 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 Sdg has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Federated Hermes go up and down completely randomly.

Pair Corralation between Growth Opportunities and Federated Hermes

Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 1.32 times more return on investment than Federated Hermes. However, Growth Opportunities is 1.32 times more volatile than Federated Hermes Sdg. It trades about 0.34 of its potential returns per unit of risk. Federated Hermes Sdg is currently generating about 0.26 per unit of risk. If you would invest  5,471  in Growth Opportunities Fund on September 1, 2024 and sell it today you would earn a total of  385.00  from holding Growth Opportunities Fund or generate 7.04% return on investment over 90 days.

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

Growth Opportunities Fund  vs.  Federated Hermes Sdg

Growth Opportunities

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Opportunities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Federated Hermes Sdg

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Sdg are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Hermes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Opportunities and Federated Hermes

The main advantage of trading using opposite Growth Opportunities and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Opportunities 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 Growth Opportunities Fund and Federated Hermes Sdg 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..