Correlation Between IMPERIAL TOBACCO and Herms International
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and Herms 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 IMPERIAL TOBACCO and Herms International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Herms International Socit, you can compare the effects of market volatilities on IMPERIAL TOBACCO and Herms 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 IMPERIAL TOBACCO with a short position of Herms International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Herms International.
Diversification Opportunities for IMPERIAL TOBACCO and Herms International
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and Herms is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with Herms International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Herms International go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Herms International
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 8.8 times less return on investment than Herms International. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 2.45 times less risky than Herms International. It trades about 0.11 of its potential returns per unit of risk. Herms International Socit is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 203,600 in Herms International Socit on October 30, 2024 and sell it today you would earn a total of 60,400 from holding Herms International Socit or generate 29.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.37% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Herms International Socit
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Herms International Socit |
IMPERIAL TOBACCO and Herms International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Herms International
The main advantage of trading using opposite IMPERIAL TOBACCO and Herms International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, Herms 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 Herms International will offset losses from the drop in Herms International's long position.| IMPERIAL TOBACCO vs. Clean Energy Fuels | IMPERIAL TOBACCO vs. BII Railway Transportation | IMPERIAL TOBACCO vs. SALESFORCE INC CDR | IMPERIAL TOBACCO vs. Broadridge Financial Solutions |
| Herms International vs. Park Hotels Resorts | Herms International vs. CompuGroup Medical SE | Herms International vs. NH HOTEL GROUP | Herms International vs. Japan Medical Dynamic |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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