Correlation Between Eramet SA and Hermes International
Can any of the company-specific risk be diversified away by investing in both Eramet SA 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 Eramet SA and Hermes International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eramet SA and Hermes International SCA, you can compare the effects of market volatilities on Eramet SA 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 Eramet SA with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eramet SA and Hermes International.
Diversification Opportunities for Eramet SA and Hermes International
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Eramet and Hermes is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eramet SA 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 Eramet SA 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 Eramet SA 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 Eramet SA i.e., Eramet SA and Hermes International go up and down completely randomly.
Pair Corralation between Eramet SA and Hermes International
Assuming the 90 days trading horizon Eramet SA is expected to under-perform the Hermes International. In addition to that, Eramet SA is 1.74 times more volatile than Hermes International SCA. It trades about -0.16 of its total potential returns per unit of risk. Hermes International SCA is currently generating about -0.01 per unit of volatility. If you would invest 217,000 in Hermes International SCA on September 1, 2024 and sell it today you would lose (10,500) from holding Hermes International SCA or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eramet SA vs. Hermes International SCA
Performance |
| Timeline |
| Eramet SA |
| Hermes International SCA |
Eramet SA and Hermes International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eramet SA and Hermes International
The main advantage of trading using opposite Eramet SA and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eramet SA 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.The idea behind Eramet SA and Hermes International SCA 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.| Hermes International vs. Kering SA | Hermes International vs. LVMH Mot Hennessy | Hermes International vs. LOreal SA | Hermes International vs. Christian Dior SE |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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