Correlation Between Capri Holdings and Sociedad Quimica

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

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

Diversification Opportunities for Capri Holdings and Sociedad Quimica

0.26

Correlation Coefficient

Capri Holdings  Sociedad Quimica

Modest diversification

The 3 months correlation between Capri and Sociedad is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y 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 Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of Capri Holdings i.e., Capri Holdings and Sociedad Quimica go up and down completely randomly.

Pair Corralation between Capri Holdings and Sociedad Quimica

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Sociedad Quimica. In addition to that, Capri Holdings is 2.38 times more volatile than Sociedad Quimica y. It trades about -0.05 of its total potential returns per unit of risk. Sociedad Quimica y is currently generating about 0.01 per unit of volatility. If you would invest  3,880  in Sociedad Quimica y on August 30, 2024 and sell it today you would lose (24.00) from holding Sociedad Quimica y or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Capri Holdings  vs.  Sociedad Quimica y

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.

Sociedad Quimica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sociedad Quimica is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Capri Holdings and Sociedad Quimica

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

The idea behind Capri Holdings and Sociedad Quimica y 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.