Correlation Between Capri Holdings and Columbia Sportswear

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

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

Diversification Opportunities for Capri Holdings and Columbia Sportswear

0.56

Correlation Coefficient

Capri Holdings  Columbia Sportswear

Very weak diversification

The 3 months correlation between Capri and Columbia is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings Limited and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear and Capri Holdings 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 Capri Holdings Limited are associated (or correlated) with Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Capri Holdings i.e., Capri Holdings and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Capri Holdings and Columbia Sportswear

Assuming the 90 days horizon Capri Holdings Limited is expected to generate 1.78 times more return on investment than Columbia Sportswear. However, Capri Holdings is 1.78 times more volatile than Columbia Sportswear. It trades about 0.0 of its potential returns per unit of risk. Columbia Sportswear is currently generating about -0.1 per unit of risk. If you would invest  1,994  in Capri Holdings Limited on December 29, 2024 and sell it today you would lose (67.00) from holding Capri Holdings Limited or give up 3.36% of portfolio value over 90 days.

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

Capri Holdings Limited  vs.  Columbia Sportswear

Capri Holdings

Risk-Adjusted Performance

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 nearly stable basic indicators, Capri Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Sportswear 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Capri Holdings and Columbia Sportswear

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

The idea behind Capri Holdings Limited and Columbia Sportswear 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.