Correlation Between Hermes International and Swatch Group
Can any of the company-specific risk be diversified away by investing in both Hermes International and Swatch Group 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 Swatch Group 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 The Swatch Group, you can compare the effects of market volatilities on Hermes International and Swatch Group 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 Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and Swatch Group.
Diversification Opportunities for Hermes International and Swatch Group
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hermes and Swatch is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SA and The Swatch Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group 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 Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group has no effect on the direction of Hermes International i.e., Hermes International and Swatch Group go up and down completely randomly.
Pair Corralation between Hermes International and Swatch Group
Assuming the 90 days horizon Hermes International is expected to generate 2.33 times less return on investment than Swatch Group. But when comparing it to its historical volatility, Hermes International SA is 1.47 times less risky than Swatch Group. It trades about 0.05 of its potential returns per unit of risk. The Swatch Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,660 in The Swatch Group on November 28, 2024 and sell it today you would earn a total of 120.00 from holding The Swatch Group or generate 3.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Hermes International SA vs. The Swatch Group
Performance |
Timeline |
Hermes International |
Swatch Group |
Hermes International and Swatch Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hermes International and Swatch Group
The main advantage of trading using opposite Hermes International and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermes International position performs unexpectedly, Swatch Group 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 Swatch Group will offset losses from the drop in Swatch Group's long position.Hermes International vs. LVMH Mot Hennessy | Hermes International vs. Kering SA | Hermes International vs. Capri Holdings | Hermes International vs. Tapestry |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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