Correlation Between Fossil and Hermes International

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

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

Diversification Opportunities for Fossil and Hermes International

0.12

Correlation Coefficient

Fossil  Hermes International

Average diversification

The 3 months correlation between Fossil and Hermes is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group 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 Fossil 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 Fossil Group 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 Fossil i.e., Fossil and Hermes International go up and down completely randomly.

Pair Corralation between Fossil and Hermes International

Given the investment horizon of 90 days Fossil Group is expected to generate 2.04 times more return on investment than Hermes International. However, Fossil is 2.04 times more volatile than Hermes International SCA. It trades about 0.12 of its potential returns per unit of risk. Hermes International SCA is currently generating about -0.04 per unit of risk. If you would invest  111.00  in Fossil Group on September 1, 2024 and sell it today you would earn a total of  35.00  from holding Fossil Group or generate 31.53% return on investment over 90 days.

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

Fossil Group  vs.  Hermes International SCA

Fossil Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fossil Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Fossil disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Hermes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fossil and Hermes International

The main advantage of trading using opposite Fossil and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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 Fossil Group 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.