Correlation Between Hermes International and Prada Spa
Can any of the company-specific risk be diversified away by investing in both Hermes International and Prada Spa 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 Prada Spa 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 Prada Spa PK, you can compare the effects of market volatilities on Hermes International and Prada Spa 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 Prada Spa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and Prada Spa.
Diversification Opportunities for Hermes International and Prada Spa
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hermes and Prada is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and Prada Spa PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prada Spa PK 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 Prada Spa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prada Spa PK has no effect on the direction of Hermes International i.e., Hermes International and Prada Spa go up and down completely randomly.
Pair Corralation between Hermes International and Prada Spa
Assuming the 90 days horizon Hermes International SCA is expected to under-perform the Prada Spa. 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 Prada Spa. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Prada Spa PK is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,473 in Prada Spa PK on August 30, 2024 and sell it today you would lose (69.00) from holding Prada Spa PK or give up 4.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hermes International SCA vs. Prada Spa PK
Performance |
| Timeline |
| Hermes International SCA |
| Prada Spa PK |
Hermes International and Prada Spa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hermes International and Prada Spa
The main advantage of trading using opposite Hermes International and Prada Spa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermes International position performs unexpectedly, Prada Spa 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 Prada Spa will offset losses from the drop in Prada Spa's long position.| Hermes International vs. Christian Dior SE | Hermes International vs. Burberry Group Plc | Hermes International vs. Compagnie Financiere Richemont | Hermes International vs. Hermes International SA |
| Prada Spa vs. Chow Tai Fook | Prada Spa vs. Christian Dior SE | Prada Spa vs. Kering SA | Prada Spa 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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