Correlation Between Envela Corp and Capri Holdings

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

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

Diversification Opportunities for Envela Corp and Capri Holdings

0.49

Correlation Coefficient

Envela Corp  Capri Holdings

Very weak diversification

The 3 months correlation between Envela and Capri is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Envela Corp and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Envela Corp 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 Envela Corp are associated (or correlated) with Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Envela Corp i.e., Envela Corp and Capri Holdings go up and down completely randomly.

Pair Corralation between Envela Corp and Capri Holdings

Considering the 90-day investment horizon Envela Corp is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Envela Corp is 1.3 times less risky than Capri Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Capri Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,052  in Capri Holdings on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Capri Holdings or generate 0.34% return on investment over 90 days.

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

Envela Corp  vs.  Capri Holdings

Envela Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Envela Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Envela Corp and Capri Holdings

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

The idea behind Envela Corp and Capri Holdings 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.