Correlation Between Gap, and Capri Holdings

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

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

Diversification Opportunities for Gap, and Capri Holdings

0.48

Correlation Coefficient

Gap,  Capri Holdings

Very weak diversification

The 3 months correlation between Gap, and Capri is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Capri Holdings go up and down completely randomly.

Pair Corralation between Gap, and Capri Holdings

Considering the 90-day investment horizon The Gap, is expected to generate 0.9 times more return on investment than Capri Holdings. However, The Gap, is 1.12 times less risky than Capri Holdings. It trades about 0.06 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.02 per unit of risk. If you would invest  936.00  in The Gap, on December 27, 2024 and sell it today you would earn a total of  1,187  from holding The Gap, or generate 126.82% return on investment over 90 days.

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

The Gap,  vs.  Capri Holdings

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 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 Gap, and Capri Holdings

The main advantage of trading using opposite Gap, and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..