Correlation Between Hermes International and VANTIVA SA

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

Diversification Opportunities for Hermes International and VANTIVA SA

-0.44

Correlation Coefficient

Hermes International  VANTIVA SA

Very good diversification

The 3 months correlation between Hermes and VANTIVA is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and VANTIVA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VANTIVA 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 VANTIVA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VANTIVA SA has no effect on the direction of Hermes International i.e., Hermes International and VANTIVA SA go up and down completely randomly.

Pair Corralation between Hermes International and VANTIVA SA

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.48 times more return on investment than VANTIVA SA. However, Hermes International SCA is 2.08 times less risky than VANTIVA SA. It trades about 0.35 of its potential returns per unit of risk. VANTIVA SA is currently generating about -0.11 per unit of risk. If you would invest  206,300  in Hermes International SCA on September 27, 2024 and sell it today you would earn a total of  23,500  from holding Hermes International SCA or generate 11.39% 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.  VANTIVA SA

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.

VANTIVA SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VANTIVA SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VANTIVA SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hermes International and VANTIVA SA

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

The idea behind Hermes International SCA and VANTIVA 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 Stocks Directory module to find actively traded stocks across global markets.