Correlation Between Ralph Lauren and Levi Strauss

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

Diversification Opportunities for Ralph Lauren and Levi Strauss

0.73

Correlation Coefficient

Ralph Lauren  Levi Strauss

Poor diversification

The 3 months correlation between Ralph and Levi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Levi Strauss go up and down completely randomly.

Pair Corralation between Ralph Lauren and Levi Strauss

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 1.21 times more return on investment than Levi Strauss. However, Ralph Lauren is 1.21 times more volatile than Levi Strauss Co. It trades about 0.02 of its potential returns per unit of risk. Levi Strauss Co is currently generating about -0.04 per unit of risk. If you would invest  22,955  in Ralph Lauren Corp on December 27, 2024 and sell it today you would earn a total of  218.00  from holding Ralph Lauren Corp or generate 0.95% return on investment over 90 days.

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

Ralph Lauren Corp  vs.  Levi Strauss Co

Ralph Lauren Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Levi Strauss

Risk-Adjusted Performance

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ralph Lauren and Levi Strauss

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

The idea behind Ralph Lauren Corp and Levi Strauss Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.