Correlation Between Hermes International and MYT Netherlands

Can any of the company-specific risk be diversified away by investing in both Hermes International and MYT Netherlands 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 MYT Netherlands 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 MYT Netherlands Parent, you can compare the effects of market volatilities on Hermes International and MYT Netherlands 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 MYT Netherlands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and MYT Netherlands.

Diversification Opportunities for Hermes International and MYT Netherlands

0.91

Correlation Coefficient

Hermes International  MYT Netherlands

Almost no diversification

The 3 months correlation between Hermes and MYT is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and MYT Netherlands Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYT Netherlands Parent 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 MYT Netherlands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYT Netherlands Parent has no effect on the direction of Hermes International i.e., Hermes International and MYT Netherlands go up and down completely randomly.

Pair Corralation between Hermes International and MYT Netherlands

Assuming the 90 days horizon Hermes International is expected to generate 1.47 times less return on investment than MYT Netherlands. But when comparing it to its historical volatility, Hermes International SCA is 2.49 times less risky than MYT Netherlands. It trades about 0.13 of its potential returns per unit of risk. MYT Netherlands Parent is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  705.00  in MYT Netherlands Parent on December 19, 2024 and sell it today you would earn a total of  122.00  from holding MYT Netherlands Parent or generate 17.3% return on investment over 90 days.

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

Hermes International SCA  vs.  MYT Netherlands Parent

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.

MYT Netherlands Parent

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, MYT Netherlands exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hermes International and MYT Netherlands

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

The idea behind Hermes International SCA and MYT Netherlands Parent 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .