Correlation Between Capri Holdings and Salvatore Ferragamo

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

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

Diversification Opportunities for Capri Holdings and Salvatore Ferragamo

0.23

Correlation Coefficient

Capri Holdings  Salvatore Ferragamo

Modest diversification

The 3 months correlation between Capri and Salvatore is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo SpA 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 Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Capri Holdings i.e., Capri Holdings and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Capri Holdings and Salvatore Ferragamo

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Salvatore Ferragamo. But the stock apears to be less risky and, when comparing its historical volatility, Capri Holdings is 1.03 times less risky than Salvatore Ferragamo. The stock trades about -0.07 of its potential returns per unit of risk. The Salvatore Ferragamo SpA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Salvatore Ferragamo SpA on November 28, 2024 and sell it today you would earn a total of  108.00  from holding Salvatore Ferragamo SpA or generate 36.61% return on investment over 90 days.

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

Capri Holdings  vs.  Salvatore Ferragamo SpA

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Salvatore Ferragamo SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Salvatore Ferragamo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capri Holdings and Salvatore Ferragamo

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

The idea behind Capri Holdings and Salvatore Ferragamo SpA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.