Correlation Between Hermes International and Sogeclair

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

Diversification Opportunities for Hermes International and Sogeclair

0.32

Correlation Coefficient

Hermes International  Sogeclair

Weak diversification

The 3 months correlation between Hermes and Sogeclair is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Sogeclair SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sogeclair 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 Sogeclair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sogeclair SA has no effect on the direction of Hermes International i.e., Hermes International and Sogeclair go up and down completely randomly.

Pair Corralation between Hermes International and Sogeclair

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.72 times more return on investment than Sogeclair. However, Hermes International SCA is 1.4 times less risky than Sogeclair. It trades about 0.32 of its potential returns per unit of risk. Sogeclair SA is currently generating about 0.1 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 Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hermes International SCA  vs.  Sogeclair SA

Hermes International SCA

Risk-Adjusted Performance

Solid

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.

Sogeclair SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sogeclair SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sogeclair reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hermes International and Sogeclair

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

The idea behind Hermes International SCA and Sogeclair 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.