Correlation Between Prada SpA and Christian Dior

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

By analyzing existing cross correlation between Prada SpA and Christian Dior SE, you can compare the effects of market volatilities on Prada SpA and Christian Dior 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 Christian Dior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prada SpA and Christian Dior.

Diversification Opportunities for Prada SpA and Christian Dior

0.4

Correlation Coefficient

Prada SpA  Christian Dior

Very weak diversification

The 3 months correlation between Prada and Christian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Prada SpA and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE 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 Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of Prada SpA i.e., Prada SpA and Christian Dior go up and down completely randomly.

Pair Corralation between Prada SpA and Christian Dior

Assuming the 90 days horizon Prada SpA is expected to under-perform the Christian Dior. In addition to that, Prada SpA is 1.07 times more volatile than Christian Dior SE. It trades about -0.02 of its total potential returns per unit of risk. Christian Dior SE is currently generating about -0.01 per unit of volatility. If you would invest  15,700  in Christian Dior SE on December 30, 2024 and sell it today you would lose (942.00) from holding Christian Dior SE or give up 6.0% of portfolio value over 90 days.

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

Prada SpA  vs.  Christian Dior SE

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.

Christian Dior SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Christian Dior SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Christian Dior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prada SpA and Christian Dior

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

The idea behind Prada SpA and Christian Dior SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.