Correlation Between Hermes International and Birks

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

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

Diversification Opportunities for Hermes International and Birks

-0.64

Correlation Coefficient

Hermes International  Birks

Excellent diversification

The 3 months correlation between Hermes and Birks is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Birks Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Birks Group and Hermes International 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 Hermes International SCA are associated (or correlated) with Birks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Birks Group has no effect on the direction of Hermes International i.e., Hermes International and Birks go up and down completely randomly.

Pair Corralation between Hermes International and Birks

Assuming the 90 days horizon Hermes International SCA is expected to generate 0.38 times more return on investment than Birks. However, Hermes International SCA is 2.62 times less risky than Birks. It trades about 0.13 of its potential returns per unit of risk. Birks Group is currently generating about -0.08 per unit of risk. If you would invest  238,275  in Hermes International SCA on December 20, 2024 and sell it today you would earn a total of  34,305  from holding Hermes International SCA or generate 14.4% return on investment over 90 days.

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

Hermes International SCA  vs.  Birks Group

Hermes International SCA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 10 (%) 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.

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hermes International and Birks

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

The idea behind Hermes International SCA and Birks Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.