Correlation Between Hermes International and Kering SA

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

Diversification Opportunities for Hermes International and Kering SA

-0.08

Correlation Coefficient

Hermes International  Kering SA

Good diversification

The 3 months correlation between Hermes and Kering is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering 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 Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Hermes International i.e., Hermes International and Kering SA go up and down completely randomly.

Pair Corralation between Hermes International and Kering SA

Assuming the 90 days horizon Hermes International SCA is expected to generate 0.7 times more return on investment than Kering SA. However, Hermes International SCA is 1.43 times less risky than Kering SA. It trades about -0.09 of its potential returns per unit of risk. Kering SA is currently generating about -0.16 per unit of risk. If you would invest  256,993  in Hermes International SCA on January 30, 2024 and sell it today you would lose (8,180) from holding Hermes International SCA or give up 3.18% of portfolio value over 90 days.

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

Hermes International SCA  vs.  Kering SA

Hermes International SCA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hermes International reported solid returns over the last few months and may actually be approaching a breakup point.

Kering SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Hermes International SCA and Kering 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.