Correlation Between Kering SA and Hermes International

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

Diversification Opportunities for Kering SA and Hermes International

0.74

Correlation Coefficient

Kering SA  Hermes International

Poor diversification

The 3 months correlation between Kering and Hermes is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kering SA and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Kering 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 Kering 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 has no effect on the direction of Kering SA i.e., Kering SA and Hermes International go up and down completely randomly.

Pair Corralation between Kering SA and Hermes International

Assuming the 90 days horizon Kering SA is expected to generate 4.52 times less return on investment than Hermes International. In addition to that, Kering SA is 2.05 times more volatile than Hermes International SA. It trades about 0.01 of its total potential returns per unit of risk. Hermes International SA is currently generating about 0.14 per unit of volatility. If you would invest  23,900  in Hermes International SA on December 20, 2024 and sell it today you would earn a total of  3,279  from holding Hermes International SA or generate 13.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Kering SA  vs.  Hermes International SA

Kering SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kering SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kering SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kering SA and Hermes International

The main advantage of trading using opposite Kering SA and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kering 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 Kering SA and Hermes International SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..