Correlation Between Compagnie Financire and Herms International

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

By analyzing existing cross correlation between Compagnie Financire Richemont and Herms International Socit, you can compare the effects of market volatilities on Compagnie Financire and Herms 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 Compagnie Financire with a short position of Herms International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financire and Herms International.

Diversification Opportunities for Compagnie Financire and Herms International

0.8

Correlation Coefficient

Compagnie Financire  Herms International

Very poor diversification

The 3 months correlation between Compagnie and Herms is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and Compagnie Financire 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 Compagnie Financire Richemont are associated (or correlated) with Herms International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and Herms International go up and down completely randomly.

Pair Corralation between Compagnie Financire and Herms International

Assuming the 90 days trading horizon Compagnie Financire is expected to generate 1.12 times less return on investment than Herms International. In addition to that, Compagnie Financire is 1.2 times more volatile than Herms International Socit. It trades about 0.23 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.31 per unit of volatility. If you would invest  201,700  in Herms International Socit on September 23, 2024 and sell it today you would earn a total of  27,500  from holding Herms International Socit or generate 13.63% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  Herms International Socit

Compagnie Financire

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie Financire reported solid returns over the last few months and may actually be approaching a breakup point.

Herms International Socit

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Herms International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Financire and Herms International

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

The idea behind Compagnie Financire Richemont and Herms International Socit 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.