Correlation Between Fresh Del and Burberry Group

Can any of the company-specific risk be diversified away by investing in both Fresh Del and Burberry Group 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 Fresh Del and Burberry Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fresh Del Monte and Burberry Group Plc, you can compare the effects of market volatilities on Fresh Del and Burberry Group 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 Fresh Del with a short position of Burberry Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Del and Burberry Group.

Diversification Opportunities for Fresh Del and Burberry Group

0.85

Correlation Coefficient

Fresh Del  Burberry Group

Very poor diversification

The 3 months correlation between Fresh and Burberry is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Burberry Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burberry Group Plc and Fresh Del 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 Fresh Del Monte are associated (or correlated) with Burberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burberry Group Plc has no effect on the direction of Fresh Del i.e., Fresh Del and Burberry Group go up and down completely randomly.

Pair Corralation between Fresh Del and Burberry Group

Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.55 times more return on investment than Burberry Group. However, Fresh Del Monte is 1.82 times less risky than Burberry Group. It trades about 0.09 of its potential returns per unit of risk. Burberry Group Plc is currently generating about -0.04 per unit of risk. If you would invest  2,245  in Fresh Del Monte on October 1, 2024 and sell it today you would earn a total of  1,063  from holding Fresh Del Monte or generate 47.35% return on investment over 90 days.

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

Fresh Del Monte  vs.  Burberry Group Plc

Fresh Del Monte

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Fresh Del may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Burberry Group Plc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Burberry Group Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Burberry Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Del and Burberry Group

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

The idea behind Fresh Del Monte and Burberry Group Plc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.