Correlation Between Ralph Lauren and J Long

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

Diversification Opportunities for Ralph Lauren and J Long

0.48

Correlation Coefficient

Ralph Lauren  J Long

Very weak diversification

The 3 months correlation between Ralph and J Long is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and J Long Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Long Group 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 J Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Long Group has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and J Long go up and down completely randomly.

Pair Corralation between Ralph Lauren and J Long

Allowing for the 90-day total investment horizon Ralph Lauren is expected to generate 52.05 times less return on investment than J Long. But when comparing it to its historical volatility, Ralph Lauren Corp is 3.94 times less risky than J Long. It trades about 0.01 of its potential returns per unit of risk. J Long Group Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  283.00  in J Long Group Limited on December 18, 2024 and sell it today you would earn a total of  196.00  from holding J Long Group Limited or generate 69.26% return on investment over 90 days.

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

Ralph Lauren Corp  vs.  J Long Group Limited

Ralph Lauren Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ralph Lauren Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Ralph Lauren is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

J Long Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in J Long Group Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, J Long disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ralph Lauren and J Long

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

The idea behind Ralph Lauren Corp and J Long Group Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.