Correlation Between Hermes International and Berkem Group

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

Diversification Opportunities for Hermes International and Berkem Group

0.72

Correlation Coefficient

Hermes International  Berkem Group

Poor diversification

The 3 months correlation between Hermes and Berkem is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Berkem Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkem Group SA 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 Berkem Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkem Group SA has no effect on the direction of Hermes International i.e., Hermes International and Berkem Group go up and down completely randomly.

Pair Corralation between Hermes International and Berkem Group

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 5.31 times more return on investment than Berkem Group. However, Hermes International is 5.31 times more volatile than Berkem Group SA. It trades about 0.12 of its potential returns per unit of risk. Berkem Group SA is currently generating about 0.07 per unit of risk. If you would invest  211,500  in Hermes International SCA on October 10, 2024 and sell it today you would earn a total of  25,500  from holding Hermes International SCA or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hermes International SCA  vs.  Berkem Group SA

Hermes International SCA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hermes International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Berkem Group SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkem Group SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Berkem Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hermes International and Berkem Group

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

The idea behind Hermes International SCA and Berkem Group 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 CEOs Directory module to screen CEOs from public companies around the world.