Correlation Between Compagnie Financiere and Prada Spa

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

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

Diversification Opportunities for Compagnie Financiere and Prada Spa

0.31

Correlation Coefficient

Compagnie Financiere  Prada Spa

Weak diversification

The 3 months correlation between Compagnie and Prada is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Richemont 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 Compagnie Financiere 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 Compagnie Financiere Richemont 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 Compagnie Financiere i.e., Compagnie Financiere and Prada Spa go up and down completely randomly.

Pair Corralation between Compagnie Financiere and Prada Spa

Assuming the 90 days horizon Compagnie Financiere Richemont is expected to generate 0.83 times more return on investment than Prada Spa. However, Compagnie Financiere Richemont is 1.2 times less risky than Prada Spa. It trades about 0.11 of its potential returns per unit of risk. Prada Spa PK is currently generating about -0.05 per unit of risk. If you would invest  1,521  in Compagnie Financiere Richemont on December 30, 2024 and sell it today you would earn a total of  271.00  from holding Compagnie Financiere Richemont or generate 17.82% return on investment over 90 days.

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

Compagnie Financiere Richemont  vs.  Prada Spa PK

Compagnie Financiere

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financiere Richemont are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Compagnie Financiere showed solid returns over the last few months and may actually be approaching a breakup point.

Prada Spa PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prada Spa PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Compagnie Financiere and Prada Spa

The main advantage of trading using opposite Compagnie Financiere and Prada Spa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financiere 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 Compagnie Financiere Richemont 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..