Correlation Between Fossil and Capri Holdings

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

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

Diversification Opportunities for Fossil and Capri Holdings

0.2

Correlation Coefficient

Fossil  Capri Holdings

Modest diversification

The 3 months correlation between Fossil and Capri is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fossil Group and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Fossil 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 Fossil Group 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 Fossil i.e., Fossil and Capri Holdings go up and down completely randomly.

Pair Corralation between Fossil and Capri Holdings

Given the investment horizon of 90 days Fossil Group is expected to generate 3.09 times more return on investment than Capri Holdings. However, Fossil is 3.09 times more volatile than Capri Holdings. It trades about 0.05 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.05 per unit of risk. If you would invest  146.00  in Fossil Group on November 28, 2024 and sell it today you would earn a total of  9.00  from holding Fossil Group or generate 6.16% return on investment over 90 days.

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

Fossil Group  vs.  Capri Holdings

Fossil Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fossil Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Fossil disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Fossil and Capri Holdings

The main advantage of trading using opposite Fossil and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fossil 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 Fossil Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.