Correlation Between Hermes International and Salvatore Ferragamo

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

By analyzing existing cross correlation between Hermes International SA and Salvatore Ferragamo SpA, you can compare the effects of market volatilities on Hermes International and Salvatore Ferragamo 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 Salvatore Ferragamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and Salvatore Ferragamo.

Diversification Opportunities for Hermes International and Salvatore Ferragamo

0.78

Correlation Coefficient

Hermes International  Salvatore Ferragamo

Poor diversification

The 3 months correlation between Hermes and Salvatore is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SA and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo SpA 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 SA are associated (or correlated) with Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Hermes International i.e., Hermes International and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Hermes International and Salvatore Ferragamo

Assuming the 90 days horizon Hermes International SA is expected to generate 0.47 times more return on investment than Salvatore Ferragamo. However, Hermes International SA is 2.14 times less risky than Salvatore Ferragamo. It trades about 0.1 of its potential returns per unit of risk. Salvatore Ferragamo SpA is currently generating about 0.0 per unit of risk. If you would invest  23,999  in Hermes International SA on December 30, 2024 and sell it today you would earn a total of  2,405  from holding Hermes International SA or generate 10.02% return on investment over 90 days.

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

Hermes International SA  vs.  Salvatore Ferragamo SpA

Hermes International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salvatore Ferragamo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Salvatore Ferragamo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hermes International and Salvatore Ferragamo

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

The idea behind Hermes International SA and Salvatore Ferragamo SpA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.