Correlation Between Hermes International and Fast Retailing

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

Diversification Opportunities for Hermes International and Fast Retailing

0.07

Correlation Coefficient

Hermes International  Fast Retailing

Significant diversification

The 3 months correlation between Hermes and Fast is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Hermes International i.e., Hermes International and Fast Retailing go up and down completely randomly.

Pair Corralation between Hermes International and Fast Retailing

Assuming the 90 days horizon Hermes International SCA is expected to under-perform the Fast Retailing. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hermes International SCA is 1.12 times less risky than Fast Retailing. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  32,845  in Fast Retailing Co on May 18, 2025 and sell it today you would lose (1,440) from holding Fast Retailing Co or give up 4.38% of portfolio value over 90 days.

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

Hermes International SCA  vs.  Fast Retailing Co

Hermes International SCA

Risk-Adjusted Performance

Weakest

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

Fast Retailing

Risk-Adjusted Performance

Weakest

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hermes International and Fast Retailing

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

The idea behind Hermes International SCA and Fast Retailing Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.