Correlation Between Ralph Lauren and Software Acquisition

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

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

Diversification Opportunities for Ralph Lauren and Software Acquisition

0.54

Correlation Coefficient

Ralph Lauren  Software Acquisition

Very weak diversification

The 3 months correlation between Ralph and Software is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and Ralph Lauren 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 Ralph Lauren Corp are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Software Acquisition go up and down completely randomly.

Pair Corralation between Ralph Lauren and Software Acquisition

Allowing for the 90-day total investment horizon Ralph Lauren is expected to generate 49.31 times less return on investment than Software Acquisition. But when comparing it to its historical volatility, Ralph Lauren Corp is 15.03 times less risky than Software Acquisition. It trades about 0.05 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Software Acquisition Group on May 21, 2025 and sell it today you would earn a total of  0.87  from holding Software Acquisition Group or generate 54.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	53.23%
Values	Daily Returns

Ralph Lauren Corp  vs.  Software Acquisition Group

Ralph Lauren Corp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Ralph Lauren is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Software Acquisition

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Software Acquisition Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Software Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ralph Lauren and Software Acquisition

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

The idea behind Ralph Lauren Corp and Software Acquisition Group 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.