Correlation Between Salvatore Ferragamo and Hermes International

Can any of the company-specific risk be diversified away by investing in both Salvatore Ferragamo and Hermes International 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 Salvatore Ferragamo and Hermes International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Salvatore Ferragamo SpA and Hermes International SA, you can compare the effects of market volatilities on Salvatore Ferragamo and Hermes International 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 Salvatore Ferragamo with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Salvatore Ferragamo and Hermes International.

Diversification Opportunities for Salvatore Ferragamo and Hermes International

0.9

Correlation Coefficient

Salvatore Ferragamo  Hermes International

Almost no diversification

The 3 months correlation between Salvatore and Hermes is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Salvatore Ferragamo SpA and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Salvatore Ferragamo 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 Salvatore Ferragamo SpA are associated (or correlated) with Hermes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermes International has no effect on the direction of Salvatore Ferragamo i.e., Salvatore Ferragamo and Hermes International go up and down completely randomly.

Pair Corralation between Salvatore Ferragamo and Hermes International

Assuming the 90 days horizon Salvatore Ferragamo is expected to generate 1.05 times less return on investment than Hermes International. In addition to that, Salvatore Ferragamo is 2.04 times more volatile than Hermes International SA. It trades about 0.18 of its total potential returns per unit of risk. Hermes International SA is currently generating about 0.39 per unit of volatility. If you would invest  21,196  in Hermes International SA on November 19, 2024 and sell it today you would earn a total of  8,779  from holding Hermes International SA or generate 41.42% return on investment over 90 days.

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

Salvatore Ferragamo SpA  vs.  Hermes International SA

Salvatore Ferragamo SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salvatore Ferragamo SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Salvatore Ferragamo showed solid returns over the last few months and may actually be approaching a breakup point.

Hermes International

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SA are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Salvatore Ferragamo and Hermes International

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

The idea behind Salvatore Ferragamo SpA and Hermes International 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.