Correlation Between Hermes International and Brunello Cucinelli

Can any of the company-specific risk be diversified away by investing in both Hermes International and Brunello Cucinelli 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 Brunello Cucinelli 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 Brunello Cucinelli SpA, you can compare the effects of market volatilities on Hermes International and Brunello Cucinelli 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 Brunello Cucinelli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermes International and Brunello Cucinelli.

Diversification Opportunities for Hermes International and Brunello Cucinelli

0.83

Correlation Coefficient

Hermes International  Brunello Cucinelli

Very poor diversification

The 3 months correlation between Hermes and Brunello is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hermes International SA and Brunello Cucinelli SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunello Cucinelli 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 Brunello Cucinelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunello Cucinelli SpA has no effect on the direction of Hermes International i.e., Hermes International and Brunello Cucinelli go up and down completely randomly.

Pair Corralation between Hermes International and Brunello Cucinelli

Assuming the 90 days horizon Hermes International SA is expected to generate 1.13 times more return on investment than Brunello Cucinelli. However, Hermes International is 1.13 times more volatile than Brunello Cucinelli SpA. It trades about -0.04 of its potential returns per unit of risk. Brunello Cucinelli SpA is currently generating about -0.23 per unit of risk. If you would invest  25,400  in Hermes International SA on January 19, 2024 and sell it today you would lose (388.00) from holding Hermes International SA or give up 1.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hermes International SA  vs.  Brunello Cucinelli SpA

Hermes International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hermes International showed solid returns over the last few months and may actually be approaching a breakup point.

Brunello Cucinelli SpA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brunello Cucinelli SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Brunello Cucinelli showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hermes International and Brunello Cucinelli

The main advantage of trading using opposite Hermes International and Brunello Cucinelli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermes International position performs unexpectedly, Brunello Cucinelli 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 Brunello Cucinelli will offset losses from the drop in Brunello Cucinelli's long position.

The idea behind Hermes International SA and Brunello Cucinelli SpA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.