Correlation Between Brunello Cucinelli and Prada Spa

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

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

Diversification Opportunities for Brunello Cucinelli and Prada Spa

0.73

Correlation Coefficient

Brunello Cucinelli  Prada Spa

Poor diversification

The 3 months correlation between Brunello and Prada is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Brunello Cucinelli 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 Brunello Cucinelli 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 Brunello Cucinelli 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 Brunello Cucinelli i.e., Brunello Cucinelli and Prada Spa go up and down completely randomly.

Pair Corralation between Brunello Cucinelli and Prada Spa

Assuming the 90 days horizon Brunello Cucinelli SpA is expected to generate 0.8 times more return on investment than Prada Spa. However, Brunello Cucinelli SpA is 1.24 times less risky than Prada Spa. It trades about 0.06 of its potential returns per unit of risk. Prada Spa PK is currently generating about 0.04 per unit of risk. If you would invest  4,151  in Brunello Cucinelli SpA on November 19, 2024 and sell it today you would earn a total of  2,793  from holding Brunello Cucinelli SpA or generate 67.28% return on investment over 90 days.

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

Brunello Cucinelli SpA  vs.  Prada Spa PK

Brunello Cucinelli SpA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Brunello Cucinelli SpA are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Brunello Cucinelli showed solid returns over the last few months and may actually be approaching a breakup point.

Prada Spa PK

Risk-Adjusted Performance

Good

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

Pair Trading with Brunello Cucinelli and Prada Spa

The main advantage of trading using opposite Brunello Cucinelli and Prada Spa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunello Cucinelli 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 Brunello Cucinelli 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.