Correlation Between Hermes International and Energisme

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

Diversification Opportunities for Hermes International and Energisme

-0.49

Correlation Coefficient

Hermes International  Energisme

Very good diversification

The 3 months correlation between Hermes and Energisme is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Energisme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisme 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 Energisme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisme has no effect on the direction of Hermes International i.e., Hermes International and Energisme go up and down completely randomly.

Pair Corralation between Hermes International and Energisme

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.31 times more return on investment than Energisme. However, Hermes International SCA is 3.18 times less risky than Energisme. It trades about 0.06 of its potential returns per unit of risk. Energisme is currently generating about 0.0 per unit of risk. If you would invest  220,600  in Hermes International SCA on September 29, 2024 and sell it today you would earn a total of  10,800  from holding Hermes International SCA or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hermes International SCA  vs.  Energisme

Hermes International SCA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hermes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energisme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisme has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Energisme 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 Energisme

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

The idea behind Hermes International SCA and Energisme 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.