Correlation Between Capri Holdings and Environmental

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

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

Diversification Opportunities for Capri Holdings and Environmental

0.66

Correlation Coefficient

Capri Holdings  Environmental

Poor diversification

The 3 months correlation between Capri and Environmental is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and The Environmental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Environmental 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 Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Environmental has no effect on the direction of Capri Holdings i.e., Capri Holdings and Environmental go up and down completely randomly.

Pair Corralation between Capri Holdings and Environmental

Given the investment horizon of 90 days Capri Holdings is expected to generate 2.25 times more return on investment than Environmental. However, Capri Holdings is 2.25 times more volatile than The Environmental Group. It trades about -0.05 of its potential returns per unit of risk. The Environmental Group is currently generating about -0.13 per unit of risk. If you would invest  3,572  in Capri Holdings on August 30, 2024 and sell it today you would lose (1,220) from holding Capri Holdings or give up 34.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Capri Holdings  vs.  The Environmental Group

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

The Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Environmental Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Capri Holdings and Environmental

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

The idea behind Capri Holdings and The Environmental Group 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.