Correlation Between Hermes International and 21Shares Polkadot

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Can any of the company-specific risk be diversified away by investing in both Hermes International and 21Shares Polkadot 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 21Shares Polkadot 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 21Shares Polkadot ETP, you can compare the effects of market volatilities on Hermes International and 21Shares Polkadot 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 21Shares Polkadot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and 21Shares Polkadot.

Diversification Opportunities for Hermes International and 21Shares Polkadot

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Hermes and 21Shares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and 21Shares Polkadot ETP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Polkadot ETP 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 21Shares Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Polkadot ETP has no effect on the direction of Hermes International i.e., Hermes International and 21Shares Polkadot go up and down completely randomly.

Pair Corralation between Hermes International and 21Shares Polkadot

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.21 times more return on investment than 21Shares Polkadot. However, Hermes International SCA is 4.67 times less risky than 21Shares Polkadot. It trades about 0.32 of its potential returns per unit of risk. 21Shares Polkadot ETP is currently generating about -0.13 per unit of risk. If you would invest  206,245  in Hermes International SCA on November 29, 2024 and sell it today you would earn a total of  66,255  from holding Hermes International SCA or generate 32.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hermes International SCA  vs.  21Shares Polkadot ETP

 Performance 
       Timeline  
Hermes International SCA 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hermes International sustained solid returns over the last few months and may actually be approaching a breakup point.
21Shares Polkadot ETP 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days 21Shares Polkadot ETP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Hermes International and 21Shares Polkadot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hermes International and 21Shares Polkadot

The main advantage of trading using opposite Hermes International and 21Shares Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermes International position performs unexpectedly, 21Shares Polkadot 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 21Shares Polkadot will offset losses from the drop in 21Shares Polkadot's long position.
The idea behind Hermes International SCA and 21Shares Polkadot ETP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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