Correlation Between Burberry Group and Hermes International
Can any of the company-specific risk be diversified away by investing in both Burberry Group and Hermes 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 Burberry Group and Hermes International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burberry Group Plc and Hermes International SCA, you can compare the effects of market volatilities on Burberry Group and Hermes 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 Burberry Group with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burberry Group and Hermes International.
Diversification Opportunities for Burberry Group and Hermes International
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Burberry and Hermes is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Burberry Group Plc and Hermes International SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International SCA and Burberry Group 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 Burberry Group Plc are associated (or correlated) with Hermes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermes International SCA has no effect on the direction of Burberry Group i.e., Burberry Group and Hermes International go up and down completely randomly.
Pair Corralation between Burberry Group and Hermes International
Assuming the 90 days horizon Burberry Group Plc is expected to generate 1.59 times more return on investment than Hermes International. However, Burberry Group is 1.59 times more volatile than Hermes International SCA. It trades about 0.32 of its potential returns per unit of risk. Hermes International SCA is currently generating about 0.48 per unit of risk. If you would invest 1,198 in Burberry Group Plc on November 3, 2024 and sell it today you would earn a total of 262.00 from holding Burberry Group Plc or generate 21.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Burberry Group Plc vs. Hermes International SCA
Performance |
| Timeline |
| Burberry Group Plc |
| Hermes International SCA |
Burberry Group and Hermes International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burberry Group and Hermes International
The main advantage of trading using opposite Burberry Group and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burberry Group position performs unexpectedly, Hermes 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 Hermes International will offset losses from the drop in Hermes International's long position.| Burberry Group vs. Compagnie Financiere Richemont | Burberry Group vs. Hermes International SA | Burberry Group vs. Prada Spa PK | Burberry Group vs. Swatch Group AG |
| Hermes International vs. Christian Dior SE | Hermes International vs. Burberry Group Plc | Hermes International vs. Compagnie Financiere Richemont | Hermes International vs. Hermes International SA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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