Correlation Between Capri Holdings and Hongfa Technology

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

By analyzing existing cross correlation between Capri Holdings and Hongfa Technology Co, you can compare the effects of market volatilities on Capri Holdings and Hongfa Technology 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 Hongfa Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capri Holdings and Hongfa Technology.

Diversification Opportunities for Capri Holdings and Hongfa Technology

-0.31

Correlation Coefficient

Capri Holdings  Hongfa Technology

Very good diversification

The 3 months correlation between Capri and Hongfa is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Hongfa Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongfa Technology 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 Hongfa Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongfa Technology has no effect on the direction of Capri Holdings i.e., Capri Holdings and Hongfa Technology go up and down completely randomly.

Pair Corralation between Capri Holdings and Hongfa Technology

Given the investment horizon of 90 days Capri Holdings is expected to generate 5.62 times less return on investment than Hongfa Technology. In addition to that, Capri Holdings is 2.03 times more volatile than Hongfa Technology Co. It trades about 0.01 of its total potential returns per unit of risk. Hongfa Technology Co is currently generating about 0.13 per unit of volatility. If you would invest  3,168  in Hongfa Technology Co on December 30, 2024 and sell it today you would earn a total of  427.00  from holding Hongfa Technology Co or generate 13.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Capri Holdings  vs.  Hongfa Technology Co

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 fairly strong basic indicators, Capri Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Hongfa Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hongfa Technology Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongfa Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capri Holdings and Hongfa Technology

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

The idea behind Capri Holdings and Hongfa Technology Co 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.

Check out your portfolio center.

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.