Correlation Between China BlueChemical and Ralph Lauren

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

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

Diversification Opportunities for China BlueChemical and Ralph Lauren

0.55

Correlation Coefficient

China BlueChemical  Ralph Lauren

Very weak diversification

The 3 months correlation between China and Ralph is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Ralph Lauren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren and China BlueChemical 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 China BlueChemical are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren has no effect on the direction of China BlueChemical i.e., China BlueChemical and Ralph Lauren go up and down completely randomly.

Pair Corralation between China BlueChemical and Ralph Lauren

Assuming the 90 days horizon China BlueChemical is expected to generate 2.55 times less return on investment than Ralph Lauren. In addition to that, China BlueChemical is 1.55 times more volatile than Ralph Lauren. It trades about 0.06 of its total potential returns per unit of risk. Ralph Lauren is currently generating about 0.22 per unit of volatility. If you would invest  18,673  in Ralph Lauren on October 26, 2024 and sell it today you would earn a total of  5,917  from holding Ralph Lauren or generate 31.69% return on investment over 90 days.

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

China BlueChemical  vs.  Ralph Lauren

China BlueChemical

Risk-Adjusted Performance

4 of 100

Insignificant

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

Ralph Lauren

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ralph Lauren reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China BlueChemical and Ralph Lauren

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

The idea behind China BlueChemical and Ralph Lauren 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.