Correlation Between SWISS WATER and Herms International

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Herms International 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 SWISS WATER and Herms International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Herms International Socit, you can compare the effects of market volatilities on SWISS WATER and Herms International 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 SWISS WATER with a short position of Herms International. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Herms International.

Diversification Opportunities for SWISS WATER and Herms International

-0.47

Correlation Coefficient

SWISS WATER  Herms International

Very good diversification

The 3 months correlation between SWISS and Herms is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Herms International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of SWISS WATER i.e., SWISS WATER and Herms International go up and down completely randomly.

Pair Corralation between SWISS WATER and Herms International

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the Herms International. In addition to that, SWISS WATER is 1.83 times more volatile than Herms International Socit. It trades about -0.16 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.37 per unit of volatility. If you would invest  230,900  in Herms International Socit on October 24, 2024 and sell it today you would earn a total of  29,900  from holding Herms International Socit or generate 12.95% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  Herms International Socit

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Herms International Socit

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Herms International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and Herms International

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

The idea behind SWISS WATER DECAFFCOFFEE and Herms International Socit 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..