Correlation Between Compagnie Financière and Hermes International

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

By analyzing existing cross correlation between Compagnie Financire Richemont and Hermes International SA, you can compare the effects of market volatilities on Compagnie Financière and Hermes 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 Compagnie Financière with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financière and Hermes International.

Diversification Opportunities for Compagnie Financière and Hermes International

0.99

Correlation Coefficient

Compagnie Financière  Hermes International

No risk reduction

The 3 months correlation between Compagnie and Hermes is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Compagnie Financière 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 Compagnie Financire Richemont are associated (or correlated) with Hermes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermes International has no effect on the direction of Compagnie Financière i.e., Compagnie Financière and Hermes International go up and down completely randomly.

Pair Corralation between Compagnie Financière and Hermes International

Assuming the 90 days horizon Compagnie Financire Richemont is expected to generate 1.86 times more return on investment than Hermes International. However, Compagnie Financière is 1.86 times more volatile than Hermes International SA. It trades about 0.22 of its potential returns per unit of risk. Hermes International SA is currently generating about 0.3 per unit of risk. If you would invest  13,876  in Compagnie Financire Richemont on November 28, 2024 and sell it today you would earn a total of  6,224  from holding Compagnie Financire Richemont or generate 44.85% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  Hermes International SA

Compagnie Financière

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Compagnie Financière reported solid returns over the last few months and may actually be approaching a breakup point.

Hermes International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Financière and Hermes International

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

The idea behind Compagnie Financire Richemont and Hermes International SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.