Correlation Between Swatch Group and Hermès International

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

By analyzing existing cross correlation between The Swatch Group and Herms International Socit, you can compare the effects of market volatilities on Swatch Group and Hermès 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 Swatch Group with a short position of Hermès International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Hermès International.

Diversification Opportunities for Swatch Group and Hermès International

-0.22

Correlation Coefficient

Swatch Group  Hermès International

Very good diversification

The 3 months correlation between Swatch and Hermès is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Swatch Group and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and Swatch Group 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 The Swatch Group are associated (or correlated) with Hermès International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Swatch Group i.e., Swatch Group and Hermès International go up and down completely randomly.

Pair Corralation between Swatch Group and Hermès International

Assuming the 90 days trading horizon The Swatch Group is expected to under-perform the Hermès International. In addition to that, Swatch Group is 1.67 times more volatile than Herms International Socit. It trades about -0.06 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.06 per unit of volatility. If you would invest  217,000  in Herms International Socit on October 7, 2024 and sell it today you would earn a total of  12,300  from holding Herms International Socit or generate 5.67% return on investment over 90 days.

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

The Swatch Group  vs.  Herms International Socit

Swatch Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Swatch Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Herms International Socit

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hermès International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Swatch Group and Hermès International

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

The idea behind The Swatch Group and Herms International Socit 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..