Correlation Between Hua Hong and Hermès International
Can any of the company-specific risk be diversified away by investing in both Hua Hong and Hermès International 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 Hua Hong and Hermès International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hua Hong Semiconductor and Herms International Socit, you can compare the effects of market volatilities on Hua Hong and Hermès International 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 Hua Hong with a short position of Hermès International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and Hermès International.
Diversification Opportunities for Hua Hong and Hermès International
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hua and Hermès is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and Hua Hong 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 Hua Hong Semiconductor are associated (or correlated) with Hermès International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Hua Hong i.e., Hua Hong and Hermès International go up and down completely randomly.
Pair Corralation between Hua Hong and Hermès International
Assuming the 90 days horizon Hua Hong is expected to generate 4.19 times less return on investment than Hermès International. In addition to that, Hua Hong is 2.19 times more volatile than Herms International Socit. It trades about 0.01 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.06 per unit of volatility. If you would invest 171,494 in Herms International Socit on November 6, 2024 and sell it today you would earn a total of 99,506 from holding Herms International Socit or generate 58.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hua Hong Semiconductor vs. Herms International Socit
Performance |
| Timeline |
| Hua Hong Semiconductor |
| Herms International Socit |
Hua Hong and Hermès International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hua Hong and Hermès International
The main advantage of trading using opposite Hua Hong and Hermès International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong position performs unexpectedly, Hermès International 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 Hermès International will offset losses from the drop in Hermès International's long position.| Hua Hong vs. US Physical Therapy | Hua Hong vs. Commonwealth Bank of | Hua Hong vs. Virtu Financial | Hua Hong vs. CeoTronics AG |
| Hermès International vs. ZURICH INSURANCE GROUP | Hermès International vs. Aya Gold Silver | Hermès International vs. Direct Line Insurance | Hermès International vs. United Insurance Holdings |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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