Correlation Between Guidepath Conservative and Federated Hermes

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

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

Diversification Opportunities for Guidepath Conservative and Federated Hermes

0.81

Correlation Coefficient

Guidepath Conservative  Federated Hermes

Very poor diversification

The 3 months correlation between Guidepath and Federated is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Guidepath Conservative Income and Federated Hermes Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Con and Guidepath Conservative 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 Guidepath Conservative Income 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 Con has no effect on the direction of Guidepath Conservative i.e., Guidepath Conservative and Federated Hermes go up and down completely randomly.

Pair Corralation between Guidepath Conservative and Federated Hermes

Assuming the 90 days horizon Guidepath Conservative is expected to generate 3.81 times less return on investment than Federated Hermes. But when comparing it to its historical volatility, Guidepath Conservative Income is 1.3 times less risky than Federated Hermes. It trades about 0.07 of its potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  989.00  in Federated Hermes Conservative on January 9, 2025 and sell it today you would earn a total of  12.00  from holding Federated Hermes Conservative or generate 1.21% return on investment over 90 days.

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

Guidepath Conservative Income  vs.  Federated Hermes Conservative

Guidepath Conservative

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guidepath Conservative Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Guidepath Conservative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Hermes Con

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Conservative are ranked lower than 16 (%) 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 Guidepath Conservative and Federated Hermes

The main advantage of trading using opposite Guidepath Conservative and Federated Hermes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidepath Conservative 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 Guidepath Conservative Income and Federated Hermes Conservative 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.