Correlation Between Lanvin Group and Burberry Group

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

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

Diversification Opportunities for Lanvin Group and Burberry Group

-0.36

Correlation Coefficient

Lanvin Group  Burberry Group

Very good diversification

The 3 months correlation between Lanvin and Burberry is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lanvin Group Holdings and Burberry Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burberry Group plc and Lanvin Group 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 Lanvin Group Holdings are associated (or correlated) with Burberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burberry Group plc has no effect on the direction of Lanvin Group i.e., Lanvin Group and Burberry Group go up and down completely randomly.

Pair Corralation between Lanvin Group and Burberry Group

Given the investment horizon of 90 days Lanvin Group Holdings is expected to under-perform the Burberry Group. In addition to that, Lanvin Group is 1.3 times more volatile than Burberry Group plc. It trades about -0.05 of its total potential returns per unit of risk. Burberry Group plc is currently generating about 0.1 per unit of volatility. If you would invest  1,055  in Burberry Group plc on September 2, 2024 and sell it today you would earn a total of  95.00  from holding Burberry Group plc or generate 9.0% return on investment over 90 days.

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

Lanvin Group Holdings  vs.  Burberry Group plc

Lanvin Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lanvin Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lanvin Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Burberry Group plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Burberry Group plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Burberry Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lanvin Group and Burberry Group

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

The idea behind Lanvin Group Holdings and Burberry Group plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.