Correlation Between Ralph Lauren and GoPro

Can any of the company-specific risk be diversified away by investing in both Ralph Lauren and GoPro 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 GoPro 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 GoPro Inc, you can compare the effects of market volatilities on Ralph Lauren and GoPro 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 GoPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and GoPro.

Diversification Opportunities for Ralph Lauren and GoPro

-0.42

Correlation Coefficient

Ralph Lauren  GoPro

Very good diversification

The 3 months correlation between Ralph and GoPro is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and GoPro go up and down completely randomly.

Pair Corralation between Ralph Lauren and GoPro

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.47 times more return on investment than GoPro. However, Ralph Lauren Corp is 2.11 times less risky than GoPro. It trades about 0.14 of its potential returns per unit of risk. GoPro Inc is currently generating about -0.02 per unit of risk. If you would invest  16,744  in Ralph Lauren Corp on September 30, 2024 and sell it today you would earn a total of  6,211  from holding Ralph Lauren Corp or generate 37.09% 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.  GoPro Inc

Ralph Lauren Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

GoPro Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoPro Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ralph Lauren and GoPro

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

The idea behind Ralph Lauren Corp and GoPro Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.