Correlation Between Capri Holdings and Radian

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

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

Diversification Opportunities for Capri Holdings and Radian

0.53

Correlation Coefficient

Capri Holdings  Radian

Very weak diversification

The 3 months correlation between Capri and Radian is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group 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 Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of Capri Holdings i.e., Capri Holdings and Radian go up and down completely randomly.

Pair Corralation between Capri Holdings and Radian

Given the investment horizon of 90 days Capri Holdings is expected to generate 1.46 times less return on investment than Radian. In addition to that, Capri Holdings is 2.68 times more volatile than Radian Group. It trades about 0.02 of its total potential returns per unit of risk. Radian Group is currently generating about 0.07 per unit of volatility. If you would invest  3,148  in Radian Group on December 28, 2024 and sell it today you would earn a total of  169.00  from holding Radian Group or generate 5.37% return on investment over 90 days.

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

Capri Holdings  vs.  Radian Group

Capri Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Radian Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Radian Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radian is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Capri Holdings and Radian

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

The idea behind Capri Holdings and Radian 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.