Correlation Between Levi Strauss and Capri Holdings

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

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

Diversification Opportunities for Levi Strauss and Capri Holdings

0.74

Correlation Coefficient

Levi Strauss  Capri Holdings

Poor diversification

The 3 months correlation between Levi and Capri is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Levi Strauss 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 Levi Strauss Co 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 Levi Strauss i.e., Levi Strauss and Capri Holdings go up and down completely randomly.

Pair Corralation between Levi Strauss and Capri Holdings

Assuming the 90 days trading horizon Levi Strauss Co is expected to generate 0.63 times more return on investment than Capri Holdings. However, Levi Strauss Co is 1.58 times less risky than Capri Holdings. It trades about 0.05 of its potential returns per unit of risk. Capri Holdings Limited is currently generating about -0.06 per unit of risk. If you would invest  1,570  in Levi Strauss Co on September 24, 2024 and sell it today you would earn a total of  25.00  from holding Levi Strauss Co or generate 1.59% return on investment over 90 days.

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

Levi Strauss Co  vs.  Capri Holdings Limited

Levi Strauss

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Levi Strauss Co 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.

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Levi Strauss and Capri Holdings

The main advantage of trading using opposite Levi Strauss and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Levi Strauss 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 Levi Strauss Co and Capri Holdings 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.