Correlation Between Federated Hermes and Build Funds

Can any of the company-specific risk be diversified away by investing in both Federated Hermes and Build Funds 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 Build Funds 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 Build Funds Trust, you can compare the effects of market volatilities on Federated Hermes and Build Funds 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 Build Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Hermes and Build Funds.

Diversification Opportunities for Federated Hermes and Build Funds

0.91

Correlation Coefficient

Federated Hermes  Build Funds

Almost no diversification

The 3 months correlation between Federated and Build is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Federated Hermes ETF and Build Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build Funds Trust 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 Build Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build Funds Trust has no effect on the direction of Federated Hermes i.e., Federated Hermes and Build Funds go up and down completely randomly.

Pair Corralation between Federated Hermes and Build Funds

Given the investment horizon of 90 days Federated Hermes is expected to generate 1.7 times less return on investment than Build Funds. But when comparing it to its historical volatility, Federated Hermes ETF is 4.13 times less risky than Build Funds. It trades about 0.25 of its potential returns per unit of risk. Build Funds Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,260  in Build Funds Trust on July 19, 2024 and sell it today you would earn a total of  175.00  from holding Build Funds Trust or generate 7.74% return on investment over 90 days.

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

Federated Hermes ETF  vs.  Build Funds Trust

Federated Hermes ETF

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes ETF are ranked lower than 17 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Build Funds Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Build Funds Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Build Funds is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Hermes and Build Funds

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

The idea behind Federated Hermes ETF and Build Funds Trust 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.