Correlation Between Vivendi SA and Hermes International

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

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

Diversification Opportunities for Vivendi SA and Hermes International

-0.15

Correlation Coefficient

Vivendi SA  Hermes International

Good diversification

The 3 months correlation between Vivendi and Hermes is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vivendi SA and Hermes International SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International SCA and Vivendi SA 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 Vivendi SA 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 SCA has no effect on the direction of Vivendi SA i.e., Vivendi SA and Hermes International go up and down completely randomly.

Pair Corralation between Vivendi SA and Hermes International

Assuming the 90 days trading horizon Vivendi SA is expected to under-perform the Hermes International. But the stock apears to be less risky and, when comparing its historical volatility, Vivendi SA is 1.48 times less risky than Hermes International. The stock trades about -0.18 of its potential returns per unit of risk. The Hermes International SCA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  189,600  in Hermes International SCA on September 14, 2024 and sell it today you would earn a total of  38,800  from holding Hermes International SCA or generate 20.46% return on investment over 90 days.

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

Vivendi SA  vs.  Hermes International SCA

Vivendi SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vivendi SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hermes International SCA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 12 (%) 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.

Pair Trading with Vivendi SA and Hermes International

The main advantage of trading using opposite Vivendi SA and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vivendi SA 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 Vivendi SA and Hermes International SCA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.