Correlation Between Prada SpA and Brunello Cucinelli

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

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

Diversification Opportunities for Prada SpA and Brunello Cucinelli

0.51

Correlation Coefficient

Prada SpA  Brunello Cucinelli

Very weak diversification

The 3 months correlation between Prada and Brunello is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Prada SpA and Brunello Cucinelli SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunello Cucinelli SpA and Prada SpA 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 Prada SpA are associated (or correlated) with Brunello Cucinelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunello Cucinelli SpA has no effect on the direction of Prada SpA i.e., Prada SpA and Brunello Cucinelli go up and down completely randomly.

Pair Corralation between Prada SpA and Brunello Cucinelli

Assuming the 90 days horizon Prada SpA is expected to under-perform the Brunello Cucinelli. In addition to that, Prada SpA is 1.38 times more volatile than Brunello Cucinelli SpA. It trades about -0.02 of its total potential returns per unit of risk. Brunello Cucinelli SpA is currently generating about 0.05 per unit of volatility. If you would invest  1,094  in Brunello Cucinelli SpA on December 30, 2024 and sell it today you would earn a total of  60.00  from holding Brunello Cucinelli SpA or generate 5.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Prada SpA  vs.  Brunello Cucinelli SpA

Prada SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prada SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Prada SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brunello Cucinelli SpA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brunello Cucinelli SpA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Brunello Cucinelli may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prada SpA and Brunello Cucinelli

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

The idea behind Prada SpA and Brunello Cucinelli SpA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..