Correlation Between Hermes International and Valbiotis SAS

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

Diversification Opportunities for Hermes International and Valbiotis SAS

0.59

Correlation Coefficient

Hermes International  Valbiotis SAS

Very weak diversification

The 3 months correlation between Hermes and Valbiotis is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Valbiotis SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valbiotis SAS 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 Valbiotis SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valbiotis SAS has no effect on the direction of Hermes International i.e., Hermes International and Valbiotis SAS go up and down completely randomly.

Pair Corralation between Hermes International and Valbiotis SAS

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.33 times more return on investment than Valbiotis SAS. However, Hermes International SCA is 3.03 times less risky than Valbiotis SAS. It trades about 0.06 of its potential returns per unit of risk. Valbiotis SAS is currently generating about -0.02 per unit of risk. If you would invest  152,879  in Hermes International SCA on September 26, 2024 and sell it today you would earn a total of  76,921  from holding Hermes International SCA or generate 50.31% return on investment over 90 days.

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

Hermes International SCA  vs.  Valbiotis SAS

Hermes International SCA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 3 (%) 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.

Valbiotis SAS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valbiotis SAS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Valbiotis SAS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hermes International and Valbiotis SAS

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

The idea behind Hermes International SCA and Valbiotis SAS 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.