Correlation Between Prada Spa and Hermes International
Can any of the company-specific risk be diversified away by investing in both Prada Spa 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 Prada Spa and Hermes International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prada Spa PK and Hermes International SA, you can compare the effects of market volatilities on Prada Spa 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 Prada Spa with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prada Spa and Hermes International.
Diversification Opportunities for Prada Spa and Hermes International
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prada and Hermes is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Prada Spa PK and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and Prada Spa 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 Prada Spa PK 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 has no effect on the direction of Prada Spa i.e., Prada Spa and Hermes International go up and down completely randomly.
Pair Corralation between Prada Spa and Hermes International
Assuming the 90 days horizon Prada Spa is expected to generate 4.37 times less return on investment than Hermes International. In addition to that, Prada Spa is 1.32 times more volatile than Hermes International SA. It trades about 0.09 of its total potential returns per unit of risk. Hermes International SA is currently generating about 0.53 per unit of volatility. 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 | 100.0% |
| Values | Daily Returns |
Prada Spa PK vs. Hermes International SA
Performance |
| Timeline |
| Prada Spa PK |
| Hermes International |
Prada Spa and Hermes International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prada Spa and Hermes International
The main advantage of trading using opposite Prada Spa and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prada Spa 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.| Prada Spa vs. Chow Tai Fook | Prada Spa vs. Christian Dior SE | Prada Spa vs. Kering SA | Prada Spa vs. Christian Dior SE |
| Hermes International vs. LVMH Mot Hennessy | Hermes International vs. Kering SA | Hermes International vs. Capri Holdings | Hermes International vs. Tapestry |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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