Correlation Between Kering SA and Capri Holdings

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

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

Diversification Opportunities for Kering SA and Capri Holdings

0.51

Correlation Coefficient

Kering SA  Capri Holdings

Very weak diversification

The 3 months correlation between Kering and Capri is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kering SA and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Kering SA 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 Kering SA 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 Kering SA i.e., Kering SA and Capri Holdings go up and down completely randomly.

Pair Corralation between Kering SA and Capri Holdings

Assuming the 90 days horizon Kering SA is expected to generate 0.94 times more return on investment than Capri Holdings. However, Kering SA is 1.07 times less risky than Capri Holdings. It trades about 0.17 of its potential returns per unit of risk. Capri Holdings is currently generating about 0.08 per unit of risk. If you would invest  2,274  in Kering SA on November 19, 2024 and sell it today you would earn a total of  663.00  from holding Kering SA or generate 29.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Kering SA  vs.  Capri Holdings

Kering SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kering SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kering SA showed solid returns over the last few months and may actually be approaching a breakup point.

Capri Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Capri Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kering SA and Capri Holdings

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

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.