Correlation Between Burberry Group and Kering SA

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

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

Diversification Opportunities for Burberry Group and Kering SA

-0.49

Correlation Coefficient

Burberry Group  Kering SA

Very good diversification

The 3 months correlation between Burberry and Kering is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Burberry Group plc and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA and Burberry Group 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 Burberry Group plc are associated (or correlated) with Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Burberry Group i.e., Burberry Group and Kering SA go up and down completely randomly.

Pair Corralation between Burberry Group and Kering SA

Assuming the 90 days horizon Burberry Group plc is expected to generate 1.46 times more return on investment than Kering SA. However, Burberry Group is 1.46 times more volatile than Kering SA. It trades about 0.1 of its potential returns per unit of risk. Kering SA is currently generating about -0.09 per unit of risk. If you would invest  928.00  in Burberry Group plc on August 30, 2024 and sell it today you would earn a total of  222.00  from holding Burberry Group plc or generate 23.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Burberry Group plc  vs.  Kering SA

Burberry Group plc

Risk-Adjusted Performance

7 of 100

OK

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

Kering SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Burberry Group and Kering SA

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

The idea behind Burberry Group plc and Kering SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.