Correlation Between Hermes International and Grolleau SAS

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

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

Diversification Opportunities for Hermes International and Grolleau SAS

-0.45

Correlation Coefficient

Hermes International  Grolleau SAS

Very good diversification

The 3 months correlation between Hermes and Grolleau is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Grolleau SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grolleau SAS and Hermes International 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 Hermes International SCA are associated (or correlated) with Grolleau SAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grolleau SAS has no effect on the direction of Hermes International i.e., Hermes International and Grolleau SAS go up and down completely randomly.

Pair Corralation between Hermes International and Grolleau SAS

Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.62 times more return on investment than Grolleau SAS. However, Hermes International SCA is 1.61 times less risky than Grolleau SAS. It trades about 0.13 of its potential returns per unit of risk. Grolleau SAS is currently generating about -0.05 per unit of risk. If you would invest  191,600  in Hermes International SCA on September 12, 2024 and sell it today you would earn a total of  31,800  from holding Hermes International SCA or generate 16.6% return on investment over 90 days.

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

Hermes International SCA  vs.  Grolleau SAS

Hermes International SCA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 10 (%) 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.

Grolleau SAS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grolleau SAS has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Hermes International and Grolleau SAS

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

The idea behind Hermes International SCA and Grolleau SAS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.