Correlation Between H M and Ralph Lauren

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

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

Diversification Opportunities for H M and Ralph Lauren

0.62

Correlation Coefficient

H M  Ralph Lauren

Poor diversification

The 3 months correlation between HMSB and Ralph is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Ralph Lauren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren and H M 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 H M Hennes 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 H M i.e., H M and Ralph Lauren go up and down completely randomly.

Pair Corralation between H M and Ralph Lauren

Assuming the 90 days trading horizon H M Hennes is expected to generate 0.62 times more return on investment than Ralph Lauren. However, H M Hennes is 1.63 times less risky than Ralph Lauren. It trades about -0.03 of its potential returns per unit of risk. Ralph Lauren is currently generating about -0.03 per unit of risk. If you would invest  1,296  in H M Hennes on December 30, 2024 and sell it today you would lose (66.00) from holding H M Hennes or give up 5.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

H M Hennes  vs.  Ralph Lauren

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, H M is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ralph Lauren

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ralph Lauren has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with H M and Ralph Lauren

The main advantage of trading using opposite H M and Ralph Lauren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H M 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 H M Hennes 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.