Correlation Between Hermes International and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Hermes International and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Hermes International and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and STMicroelectronics.
Diversification Opportunities for Hermes International and STMicroelectronics
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hermes and STMicroelectronics is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SCA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Hermes International i.e., Hermes International and STMicroelectronics go up and down completely randomly.
Pair Corralation between Hermes International and STMicroelectronics
Assuming the 90 days trading horizon Hermes International SCA is expected to generate 0.74 times more return on investment than STMicroelectronics. However, Hermes International SCA is 1.35 times less risky than STMicroelectronics. It trades about 0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 149,818 in Hermes International SCA on August 29, 2024 and sell it today you would earn a total of 54,182 from holding Hermes International SCA or generate 36.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hermes International SCA vs. STMicroelectronics NV
Performance |
| Timeline |
| Hermes International SCA |
| STMicroelectronics |
Hermes International and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hermes International and STMicroelectronics
The main advantage of trading using opposite Hermes International and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermes International position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Hermes International vs. Kering SA | Hermes International vs. LVMH Mot Hennessy | Hermes International vs. LOreal SA | Hermes International vs. Christian Dior SE |
| STMicroelectronics vs. LVMH Mot Hennessy | STMicroelectronics vs. LOreal SA | STMicroelectronics vs. Hermes International SCA | STMicroelectronics vs. Manitou BF SA |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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