Correlation Between Columbia Sportswear and PVH Corp

Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear and PVH Corp 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 Columbia Sportswear and PVH Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Columbia Sportswear and PVH Corp, you can compare the effects of market volatilities on Columbia Sportswear and PVH Corp 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 Columbia Sportswear with a short position of PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and PVH Corp.

Diversification Opportunities for Columbia Sportswear and PVH Corp

0.5

Correlation Coefficient

Columbia Sportswear  PVH Corp

Very weak diversification

The 3 months correlation between Columbia and PVH is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp and Columbia Sportswear 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 Columbia Sportswear are associated (or correlated) with PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and PVH Corp go up and down completely randomly.

Pair Corralation between Columbia Sportswear and PVH Corp

Given the investment horizon of 90 days Columbia Sportswear is expected to generate 1.42 times less return on investment than PVH Corp. But when comparing it to its historical volatility, Columbia Sportswear is 1.25 times less risky than PVH Corp. It trades about 0.06 of its potential returns per unit of risk. PVH Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,534  in PVH Corp on August 14, 2024 and sell it today you would earn a total of  704.00  from holding PVH Corp or generate 7.38% return on investment over 90 days.

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

Columbia Sportswear  vs.  PVH Corp

Columbia Sportswear

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PVH Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, PVH Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Columbia Sportswear and PVH Corp

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

The idea behind Columbia Sportswear and PVH Corp 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.