Correlation Between Christian Dior and Hermes International

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

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

Diversification Opportunities for Christian Dior and Hermes International

0.8

Correlation Coefficient

Christian Dior  Hermes International

Very poor diversification

The 3 months correlation between Christian and Hermes is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Christian Dior SE and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Christian Dior 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 Christian Dior SE 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 Christian Dior i.e., Christian Dior and Hermes International go up and down completely randomly.

Pair Corralation between Christian Dior and Hermes International

Assuming the 90 days horizon Christian Dior SE is expected to under-perform the Hermes International. In addition to that, Christian Dior is 1.51 times more volatile than Hermes International SA. It trades about -0.07 of its total potential returns per unit of risk. Hermes International SA is currently generating about -0.06 per unit of volatility. If you would invest  23,954  in Hermes International SA on August 30, 2024 and sell it today you would lose (2,366) from holding Hermes International SA or give up 9.88% of portfolio value over 90 days.

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

Christian Dior SE  vs.  Hermes International SA

Christian Dior SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Christian Dior SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Hermes International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hermes International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Christian Dior and Hermes International

The main advantage of trading using opposite Christian Dior and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Christian Dior 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 Christian Dior SE 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.