Correlation Between Watches Of and Hermes International

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

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

Diversification Opportunities for Watches Of and Hermes International

-0.03

Correlation Coefficient

Watches Of  Hermes International

Good diversification

The 3 months correlation between Watches and Hermes is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Watches of Switzerland and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Watches Of 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 Watches of Switzerland 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 Watches Of i.e., Watches Of and Hermes International go up and down completely randomly.

Pair Corralation between Watches Of and Hermes International

Assuming the 90 days horizon Watches of Switzerland is expected to under-perform the Hermes International. In addition to that, Watches Of is 1.46 times more volatile than Hermes International SA. It trades about -0.12 of its total potential returns per unit of risk. Hermes International SA is currently generating about 0.1 per unit of volatility. If you would invest  23,999  in Hermes International SA on December 30, 2024 and sell it today you would earn a total of  2,405  from holding Hermes International SA or generate 10.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Watches of Switzerland  vs.  Hermes International SA

Watches of Switzerland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Watches of Switzerland 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hermes International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Watches Of and Hermes International

The main advantage of trading using opposite Watches Of and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watches Of 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 Watches of Switzerland 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 Stocks Directory module to find actively traded stocks across global markets.