Correlation Between H M and Moncler SpA

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

By analyzing existing cross correlation between H M Hennes and Moncler SpA, you can compare the effects of market volatilities on H M and Moncler SpA 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 H M with a short position of Moncler SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Moncler SpA.

Diversification Opportunities for H M and Moncler SpA

-0.52

Correlation Coefficient

H M  Moncler SpA

Excellent diversification

The 3 months correlation between HMSB and Moncler is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Moncler SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moncler SpA and H M 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 H M Hennes are associated (or correlated) with Moncler SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moncler SpA has no effect on the direction of H M i.e., H M and Moncler SpA go up and down completely randomly.

Pair Corralation between H M and Moncler SpA

Assuming the 90 days trading horizon H M Hennes is expected to generate 1.68 times more return on investment than Moncler SpA. However, H M is 1.68 times more volatile than Moncler SpA. It trades about 0.02 of its potential returns per unit of risk. Moncler SpA is currently generating about -0.1 per unit of risk. If you would invest  1,269  in H M Hennes on September 3, 2024 and sell it today you would earn a total of  43.00  from holding H M Hennes or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

H M Hennes  vs.  Moncler SpA

H M Hennes

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, H M exhibited solid returns over the last few months and may actually be approaching a breakup point.

Moncler SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with H M and Moncler SpA

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

The idea behind H M Hennes and Moncler SpA 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.