Correlation Between Ralph Lauren and H M

Can any of the company-specific risk be diversified away by investing in both Ralph Lauren and H M 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 Ralph Lauren and H M into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ralph Lauren and H M Hennes, you can compare the effects of market volatilities on Ralph Lauren and H M 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 Ralph Lauren with a short position of H M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and H M.

Diversification Opportunities for Ralph Lauren and H M

0.47

Correlation Coefficient

Ralph Lauren  H M

Very weak diversification

The 3 months correlation between Ralph and HMSB is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes and Ralph Lauren 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 Ralph Lauren are associated (or correlated) with H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and H M go up and down completely randomly.

Pair Corralation between Ralph Lauren and H M

Assuming the 90 days horizon Ralph Lauren is expected to generate 1.66 times more return on investment than H M. However, Ralph Lauren is 1.66 times more volatile than H M Hennes. It trades about -0.01 of its potential returns per unit of risk. H M Hennes is currently generating about -0.03 per unit of risk. If you would invest  21,690  in Ralph Lauren on December 29, 2024 and sell it today you would lose (1,131) from holding Ralph Lauren or give up 5.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Ralph Lauren  vs.  H M Hennes

Ralph Lauren

Risk-Adjusted Performance

Very Weak

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

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, H M is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ralph Lauren and H M

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

The idea behind Ralph Lauren and H M Hennes 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.