Correlation Between Compagnie Financiere and Capri Holdings

Can any of the company-specific risk be diversified away by investing in both Compagnie Financiere and Capri Holdings 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 Compagnie Financiere and Capri Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Compagnie Financiere Richemont and Capri Holdings, you can compare the effects of market volatilities on Compagnie Financiere and Capri Holdings 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 Compagnie Financiere with a short position of Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financiere and Capri Holdings.

Diversification Opportunities for Compagnie Financiere and Capri Holdings

0.47

Correlation Coefficient

Compagnie Financiere  Capri Holdings

Very weak diversification

The 3 months correlation between Compagnie and Capri is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Richemont and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Compagnie Financiere 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 Compagnie Financiere Richemont are associated (or correlated) with Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Compagnie Financiere i.e., Compagnie Financiere and Capri Holdings go up and down completely randomly.

Pair Corralation between Compagnie Financiere and Capri Holdings

Assuming the 90 days horizon Compagnie Financiere Richemont is expected to generate 0.55 times more return on investment than Capri Holdings. However, Compagnie Financiere Richemont is 1.83 times less risky than Capri Holdings. It trades about 0.05 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.07 per unit of risk. If you would invest  1,213  in Compagnie Financiere Richemont on October 1, 2024 and sell it today you would earn a total of  310.00  from holding Compagnie Financiere Richemont or generate 25.56% return on investment over 90 days.

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

Compagnie Financiere Richemont  vs.  Capri Holdings

Compagnie Financiere

Risk-Adjusted Performance

0 of 100

Very Weak

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

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Compagnie Financiere and Capri Holdings

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

The idea behind Compagnie Financiere Richemont and Capri Holdings 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.