Correlation Between Ralph Lauren and Grupo Simec

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

Diversification Opportunities for Ralph Lauren and Grupo Simec

-0.28

Correlation Coefficient

Ralph Lauren  Grupo Simec

Very good diversification

The 3 months correlation between Ralph and Grupo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Grupo Simec go up and down completely randomly.

Pair Corralation between Ralph Lauren and Grupo Simec

Allowing for the 90-day total investment horizon Ralph Lauren is expected to generate 2.97 times less return on investment than Grupo Simec. But when comparing it to its historical volatility, Ralph Lauren Corp is 1.57 times less risky than Grupo Simec. It trades about 0.01 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,643  in Grupo Simec SAB on December 26, 2024 and sell it today you would earn a total of  22.00  from holding Grupo Simec SAB or generate 0.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Ralph Lauren Corp  vs.  Grupo Simec SAB

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.

Grupo Simec SAB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Simec SAB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Grupo Simec is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ralph Lauren and Grupo Simec

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

The idea behind Ralph Lauren Corp and Grupo Simec SAB 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.