Correlation Between Hermes International and Christian Dior

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

Diversification Opportunities for Hermes International and Christian Dior

0.81

Correlation Coefficient

Hermes International  Christian Dior

Very poor diversification

The 3 months correlation between Hermes and Christian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE 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 Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of Hermes International i.e., Hermes International and Christian Dior go up and down completely randomly.

Pair Corralation between Hermes International and Christian Dior

Assuming the 90 days horizon Hermes International SCA is expected to generate 0.9 times more return on investment than Christian Dior. However, Hermes International SCA is 1.11 times less risky than Christian Dior. It trades about 0.05 of its potential returns per unit of risk. Christian Dior SE is currently generating about -0.01 per unit of risk. If you would invest  160,244  in Hermes International SCA on September 25, 2024 and sell it today you would earn a total of  78,831  from holding Hermes International SCA or generate 49.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.78%
Values	Daily Returns

Hermes International SCA  vs.  Christian Dior SE

Hermes International SCA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hermes International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Christian Dior SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Christian Dior SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Christian Dior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hermes International and Christian Dior

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

The idea behind Hermes International SCA and Christian Dior SE 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.