Correlation Between Prada SpA and Prada Spa

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

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

Diversification Opportunities for Prada SpA and Prada Spa

0.7

Correlation Coefficient

Prada SpA  Prada Spa

Poor diversification

The 3 months correlation between Prada and Prada is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prada SpA and Prada Spa PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prada Spa PK and Prada SpA 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 Prada SpA are associated (or correlated) with Prada Spa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prada Spa PK has no effect on the direction of Prada SpA i.e., Prada SpA and Prada Spa go up and down completely randomly.

Pair Corralation between Prada SpA and Prada Spa

Assuming the 90 days horizon Prada SpA is expected to generate 1.05 times less return on investment than Prada Spa. In addition to that, Prada SpA is 1.15 times more volatile than Prada Spa PK. It trades about 0.03 of its total potential returns per unit of risk. Prada Spa PK is currently generating about 0.04 per unit of volatility. If you would invest  1,170  in Prada Spa PK on September 30, 2024 and sell it today you would earn a total of  495.00  from holding Prada Spa PK or generate 42.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.17%
Values	Daily Returns

Prada SpA  vs.  Prada Spa PK

Prada SpA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prada SpA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Prada SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Prada Spa PK

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prada Spa PK are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Prada Spa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Prada SpA and Prada Spa

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

The idea behind Prada SpA and Prada Spa PK 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.