Correlation Between G-III Apparel and Sovereign Metals

Can any of the company-specific risk be diversified away by investing in both G-III Apparel and Sovereign Metals 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 G-III Apparel and Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G III Apparel Group and Sovereign Metals Limited, you can compare the effects of market volatilities on G-III Apparel and Sovereign Metals 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 G-III Apparel with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of G-III Apparel and Sovereign Metals.

Diversification Opportunities for G-III Apparel and Sovereign Metals

-0.02

Correlation Coefficient

G-III Apparel  Sovereign Metals

Good diversification

The 3 months correlation between G-III and Sovereign is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and G-III Apparel 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 G III Apparel Group are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of G-III Apparel i.e., G-III Apparel and Sovereign Metals go up and down completely randomly.

Pair Corralation between G-III Apparel and Sovereign Metals

Assuming the 90 days trading horizon G-III Apparel is expected to generate 1.81 times less return on investment than Sovereign Metals. But when comparing it to its historical volatility, G III Apparel Group is 1.19 times less risky than Sovereign Metals. It trades about 0.04 of its potential returns per unit of risk. Sovereign Metals Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Sovereign Metals Limited on October 23, 2024 and sell it today you would earn a total of  3.00  from holding Sovereign Metals Limited or generate 7.14% return on investment over 90 days.

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

G III Apparel Group  vs.  Sovereign Metals Limited

G III Apparel

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, G-III Apparel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Sovereign Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sovereign Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with G-III Apparel and Sovereign Metals

The main advantage of trading using opposite G-III Apparel and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III Apparel position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.

The idea behind G III Apparel Group and Sovereign Metals Limited 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.