Correlation Between CHRISTIAN DIOR and Hermès International

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

By analyzing existing cross correlation between CHRISTIAN DIOR ADR14EO2 and Herms International Socit, you can compare the effects of market volatilities on CHRISTIAN DIOR and Hermès 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 Hermès International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHRISTIAN DIOR and Hermès International.

Diversification Opportunities for CHRISTIAN DIOR and Hermès International

0.88

Correlation Coefficient

CHRISTIAN DIOR  Hermès International

Very poor diversification

The 3 months correlation between CHRISTIAN and Hermès is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CHRISTIAN DIOR ADR14EO2 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 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 ADR14EO2 are associated (or correlated) with Hermès 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 CHRISTIAN DIOR i.e., CHRISTIAN DIOR and Hermès International go up and down completely randomly.

Pair Corralation between CHRISTIAN DIOR and Hermès International

Assuming the 90 days trading horizon CHRISTIAN DIOR ADR14EO2 is expected to under-perform the Hermès International. But the stock apears to be less risky and, when comparing its historical volatility, CHRISTIAN DIOR ADR14EO2 is 1.0 times less risky than Hermès International. The stock trades about -0.01 of its potential returns per unit of risk. The Herms International Socit is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  169,223  in Herms International Socit on October 20, 2024 and sell it today you would earn a total of  79,477  from holding Herms International Socit or generate 46.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

CHRISTIAN DIOR ADR14EO2  vs.  Herms International Socit

CHRISTIAN DIOR ADR14EO2

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHRISTIAN DIOR ADR14EO2 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHRISTIAN DIOR reported solid returns over the last few months and may actually be approaching a breakup point.

Herms International Socit

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hermès International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHRISTIAN DIOR and Hermès International

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

The idea behind CHRISTIAN DIOR ADR14EO2 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.