Correlation Between Capri Holdings and Tonghua Grape

Can any of the company-specific risk be diversified away by investing in both Capri Holdings and Tonghua Grape 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 Capri Holdings and Tonghua Grape into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capri Holdings and Tonghua Grape Wine, you can compare the effects of market volatilities on Capri Holdings and Tonghua Grape 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 Capri Holdings with a short position of Tonghua Grape. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capri Holdings and Tonghua Grape.

Diversification Opportunities for Capri Holdings and Tonghua Grape

-0.63

Correlation Coefficient

Capri Holdings  Tonghua Grape

Excellent diversification

The 3 months correlation between Capri and Tonghua is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Tonghua Grape Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonghua Grape Wine and Capri Holdings 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 Capri Holdings are associated (or correlated) with Tonghua Grape. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonghua Grape Wine has no effect on the direction of Capri Holdings i.e., Capri Holdings and Tonghua Grape go up and down completely randomly.

Pair Corralation between Capri Holdings and Tonghua Grape

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Tonghua Grape. In addition to that, Capri Holdings is 1.35 times more volatile than Tonghua Grape Wine. It trades about -0.05 of its total potential returns per unit of risk. Tonghua Grape Wine is currently generating about -0.02 per unit of volatility. If you would invest  284.00  in Tonghua Grape Wine on November 28, 2024 and sell it today you would lose (11.00) from holding Tonghua Grape Wine or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Capri Holdings  vs.  Tonghua Grape Wine

Capri Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Tonghua Grape Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tonghua Grape Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tonghua Grape is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capri Holdings and Tonghua Grape

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

The idea behind Capri Holdings and Tonghua Grape Wine 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.