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 SA and Prada SpA, 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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hermes and Prada is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SA and Prada SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prada SpA 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 SA 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 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 SA is expected to generate 1.07 times more return on investment than Prada SpA. However, Hermes International is 1.07 times more volatile than Prada SpA. It trades about 0.53 of its potential returns per unit of risk. Prada SpA is currently generating about -0.22 per unit of risk. If you would invest 23,492 in Hermes International SA on November 3, 2024 and sell it today you would earn a total of 4,626 from holding Hermes International SA or generate 19.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Hermes International SA vs. Prada SpA
Performance |
| Timeline |
| Hermes International |
| Prada SpA |
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. LVMH Mot Hennessy | Hermes International vs. Kering SA | Hermes International vs. Capri Holdings | Hermes International vs. Tapestry |
| Prada SpA vs. Compagnie Financiere Richemont | Prada SpA vs. Kering SA | Prada SpA vs. Burberry Group Plc | Prada SpA vs. Swatch Group AG |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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