Correlation Between Ekinops SA and Hermes International

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

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

Diversification Opportunities for Ekinops SA and Hermes International

-0.8

Correlation Coefficient

Ekinops SA  Hermes International

Pay attention - limited upside

The 3 months correlation between Ekinops and Hermes is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ekinops SA 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 Ekinops SA 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 Ekinops SA 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 Ekinops SA i.e., Ekinops SA and Hermes International go up and down completely randomly.

Pair Corralation between Ekinops SA and Hermes International

Assuming the 90 days trading horizon Ekinops SA is expected to under-perform the Hermes International. But the stock apears to be less risky and, when comparing its historical volatility, Ekinops SA is 1.19 times less risky than Hermes International. The stock trades about -0.07 of its potential returns per unit of risk. The Hermes International SCA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  265,872  in Hermes International SCA on November 29, 2024 and sell it today you would earn a total of  6,628  from holding Hermes International SCA or generate 2.49% return on investment over 90 days.

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

Ekinops SA  vs.  Hermes International SCA

Ekinops SA

Risk-Adjusted Performance

Very Weak

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

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 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hermes International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ekinops SA and Hermes International

The main advantage of trading using opposite Ekinops SA and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ekinops SA 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 Ekinops SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.