Correlation Between Hermes International and Implanet

Can any of the company-specific risk be diversified away by investing in both Hermes International and Implanet 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 Implanet 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 Implanet SA, you can compare the effects of market volatilities on Hermes International and Implanet 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 Implanet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and Implanet.

Diversification Opportunities for Hermes International and Implanet

-0.56

Correlation Coefficient

Hermes International  Implanet

Excellent diversification

The 3 months correlation between Hermes and Implanet is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Implanet SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Implanet SA 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 Implanet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Implanet SA has no effect on the direction of Hermes International i.e., Hermes International and Implanet go up and down completely randomly.

Pair Corralation between Hermes International and Implanet

Assuming the 90 days trading horizon Hermes International is expected to generate 2.27 times less return on investment than Implanet. But when comparing it to its historical volatility, Hermes International SCA is 3.51 times less risky than Implanet. It trades about 0.04 of its potential returns per unit of risk. Implanet SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Implanet SA on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Implanet SA or generate 0.0% 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.  Implanet SA

Hermes International SCA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hermes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Implanet SA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Implanet SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Implanet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hermes International and Implanet

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

The idea behind Hermes International SCA and Implanet 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 Global Correlations module to find global opportunities by holding instruments from different markets.