Correlation Between Compagnie Financiere and Hermes International

Can any of the company-specific risk be diversified away by investing in both Compagnie Financiere 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 Financiere 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 Financiere Richemont and Hermes International SCA, you can compare the effects of market volatilities on Compagnie Financiere 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 Financiere with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financiere and Hermes International.

Diversification Opportunities for Compagnie Financiere and Hermes International

0.65

Correlation Coefficient

Compagnie Financiere  Hermes International

Poor diversification

The 3 months correlation between Compagnie and Hermes is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Richemont and Hermes International SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International SCA and Compagnie Financiere 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 Financiere 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 SCA has no effect on the direction of Compagnie Financiere i.e., Compagnie Financiere and Hermes International go up and down completely randomly.

Pair Corralation between Compagnie Financiere and Hermes International

Assuming the 90 days horizon Compagnie Financiere Richemont is expected to generate 1.33 times more return on investment than Hermes International. However, Compagnie Financiere is 1.33 times more volatile than Hermes International SCA. It trades about 0.26 of its potential returns per unit of risk. Hermes International SCA is currently generating about 0.25 per unit of risk. If you would invest  1,393  in Compagnie Financiere Richemont on November 28, 2024 and sell it today you would earn a total of  616.00  from holding Compagnie Financiere Richemont or generate 44.22% return on investment over 90 days.

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

Compagnie Financiere Richemont  vs.  Hermes International SCA

Compagnie Financiere

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financiere Richemont are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Compagnie Financiere showed solid returns over the last few months and may actually be approaching a breakup point.

Hermes International SCA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hermes International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Financiere and Hermes International

The main advantage of trading using opposite Compagnie Financiere and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financiere 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 Financiere Richemont and Hermes International SCA 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.