Correlation Between Hermes International and OPmobility

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

Diversification Opportunities for Hermes International and OPmobility

0.72

Correlation Coefficient

Hermes International  OPmobility

Poor diversification

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

Pair Corralation between Hermes International and OPmobility

Assuming the 90 days trading horizon Hermes International is expected to generate 1.2 times less return on investment than OPmobility. But when comparing it to its historical volatility, Hermes International SCA is 1.6 times less risky than OPmobility. It trades about 0.15 of its potential returns per unit of risk. OPmobility SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  805.00  in OPmobility SE on September 22, 2024 and sell it today you would earn a total of  173.00  from holding OPmobility SE or generate 21.49% return on investment over 90 days.

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

Hermes International SCA  vs.  OPmobility SE

Hermes International SCA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 11 (%) 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.

OPmobility SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OPmobility SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, OPmobility sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hermes International and OPmobility

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

The idea behind Hermes International SCA and OPmobility SE 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.