Correlation Between Prada SpA and Kering SA

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

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

Diversification Opportunities for Prada SpA and Kering SA

0.77

Correlation Coefficient

Prada SpA  Kering SA

Poor diversification

The 3 months correlation between Prada and Kering is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Prada SpA and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA 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 Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Prada SpA i.e., Prada SpA and Kering SA go up and down completely randomly.

Pair Corralation between Prada SpA and Kering SA

Assuming the 90 days horizon Prada SpA is expected to generate 1.33 times more return on investment than Kering SA. However, Prada SpA is 1.33 times more volatile than Kering SA. It trades about -0.02 of its potential returns per unit of risk. Kering SA is currently generating about -0.07 per unit of risk. If you would invest  763.00  in Prada SpA on December 29, 2024 and sell it today you would lose (61.00) from holding Prada SpA or give up 7.99% of portfolio value over 90 days.

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

Prada SpA  vs.  Kering SA

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.

Kering SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Prada SpA and Kering SA

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

The idea behind Prada SpA and Kering SA 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..