Correlation Between Ralph Lauren and Johnson Outdoors

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

Diversification Opportunities for Ralph Lauren and Johnson Outdoors

0.01

Correlation Coefficient

Ralph Lauren  Johnson Outdoors

Significant diversification

The 3 months correlation between Ralph and Johnson is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors 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 Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Ralph Lauren and Johnson Outdoors

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 1.09 times more return on investment than Johnson Outdoors. However, Ralph Lauren is 1.09 times more volatile than Johnson Outdoors. It trades about -0.01 of its potential returns per unit of risk. Johnson Outdoors is currently generating about -0.16 per unit of risk. If you would invest  23,222  in Ralph Lauren Corp on December 29, 2024 and sell it today you would lose (706.00) from holding Ralph Lauren Corp or give up 3.04% of portfolio value over 90 days.

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

Ralph Lauren Corp  vs.  Johnson Outdoors

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.

Johnson Outdoors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Johnson Outdoors 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ralph Lauren and Johnson Outdoors

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

The idea behind Ralph Lauren Corp and Johnson Outdoors 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.