Correlation Between Compagnie Financiere and Hermes International

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

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

Diversification Opportunities for Compagnie Financiere and Hermes International

0.94

Correlation Coefficient

Compagnie Financiere  Hermes International

Almost no diversification

The 3 months correlation between Compagnie and Hermes is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Richemont 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 Compagnie Financiere 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 Compagnie Financiere Richemont 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 Compagnie Financiere i.e., Compagnie Financiere and Hermes International go up and down completely randomly.

Pair Corralation between Compagnie Financiere and Hermes International

Assuming the 90 days horizon Compagnie Financiere Richemont is expected to under-perform the Hermes International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Compagnie Financiere Richemont is 1.04 times less risky than Hermes International. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Hermes International SCA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  237,500  in Hermes International SCA on August 30, 2024 and sell it today you would lose (21,850) from holding Hermes International SCA or give up 9.2% of portfolio value over 90 days.

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

Compagnie Financiere Richemont  vs.  Hermes International SCA

Compagnie Financiere

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Financiere Richemont has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hermes International SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hermes International SCA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Compagnie Financiere and Hermes International

The main advantage of trading using opposite Compagnie Financiere and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financiere 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 Compagnie Financiere Richemont 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 Transaction History module to view history of all your transactions and understand their impact on performance.