Correlation Between Ralph Lauren and Carters

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

By analyzing existing cross correlation between Ralph Lauren Corp and Carters, you can compare the effects of market volatilities on Ralph Lauren and Carters 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 Carters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and Carters.

Diversification Opportunities for Ralph Lauren and Carters

-0.58

Correlation Coefficient

Ralph Lauren  Carters

Excellent diversification

The 3 months correlation between Ralph and Carters is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Carters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carters 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 Corp are associated (or correlated) with Carters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carters has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Carters go up and down completely randomly.

Pair Corralation between Ralph Lauren and Carters

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.94 times more return on investment than Carters. However, Ralph Lauren Corp is 1.06 times less risky than Carters. It trades about 0.15 of its potential returns per unit of risk. Carters is currently generating about -0.02 per unit of risk. If you would invest  22,000  in Ralph Lauren Corp on September 25, 2024 and sell it today you would earn a total of  1,015  from holding Ralph Lauren Corp or generate 4.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ralph Lauren Corp  vs.  Carters

Ralph Lauren Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ralph Lauren and Carters

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

The idea behind Ralph Lauren Corp and Carters 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.