Correlation Between Abercrombie Fitch and Leonardo Spa

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

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

Diversification Opportunities for Abercrombie Fitch and Leonardo Spa

-0.9

Correlation Coefficient

Abercrombie Fitch  Leonardo Spa

Pay attention - limited upside

The 3 months correlation between Abercrombie and Leonardo is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Abercrombie Fitch and Leonardo Spa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leonardo Spa and Abercrombie Fitch 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 Abercrombie Fitch are associated (or correlated) with Leonardo Spa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leonardo Spa has no effect on the direction of Abercrombie Fitch i.e., Abercrombie Fitch and Leonardo Spa go up and down completely randomly.

Pair Corralation between Abercrombie Fitch and Leonardo Spa

Considering the 90-day investment horizon Abercrombie Fitch is expected to under-perform the Leonardo Spa. But the stock apears to be less risky and, when comparing its historical volatility, Abercrombie Fitch is 1.12 times less risky than Leonardo Spa. The stock trades about -0.29 of its potential returns per unit of risk. The Leonardo Spa is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  2,621  in Leonardo Spa on December 23, 2024 and sell it today you would earn a total of  2,463  from holding Leonardo Spa or generate 93.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Abercrombie Fitch  vs.  Leonardo Spa

Abercrombie Fitch

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abercrombie Fitch has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Leonardo Spa

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leonardo Spa are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Leonardo Spa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Abercrombie Fitch and Leonardo Spa

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

The idea behind Abercrombie Fitch and Leonardo Spa 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.