Correlation Between First Responder and Hermes International

Can any of the company-specific risk be diversified away by investing in both First Responder 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 First Responder and Hermes International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Responder Technologies and Hermes International SA, you can compare the effects of market volatilities on First Responder 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 First Responder with a short position of Hermes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Responder and Hermes International.

Diversification Opportunities for First Responder and Hermes International

-0.28

Correlation Coefficient

First Responder  Hermes International

Very good diversification

The 3 months correlation between First and Hermes is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding First Responder Technologies and Hermes International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International and First Responder 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 First Responder Technologies 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 First Responder i.e., First Responder and Hermes International go up and down completely randomly.

Pair Corralation between First Responder and Hermes International

If you would invest  24,977  in Hermes International SA on February 3, 2025 and sell it today you would earn a total of  2,887  from holding Hermes International SA or generate 11.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

First Responder Technologies  vs.  Hermes International SA

First Responder Tech

Risk-Adjusted Performance

Solid

Over the last 90 days First Responder Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly abnormal basic indicators, First Responder reported solid returns over the last few months and may actually be approaching a breakup point.

Hermes International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hermes International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hermes International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Responder and Hermes International

The main advantage of trading using opposite First Responder and Hermes International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Responder 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.

The idea behind First Responder Technologies and Hermes International SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.