Correlation Between Ralph Lauren and YETI Holdings

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

Diversification Opportunities for Ralph Lauren and YETI Holdings

0.45

Correlation Coefficient

Ralph Lauren  YETI Holdings

Very weak diversification

The 3 months correlation between Ralph and YETI is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and YETI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YETI Holdings 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 YETI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YETI Holdings has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and YETI Holdings go up and down completely randomly.

Pair Corralation between Ralph Lauren and YETI Holdings

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.8 times more return on investment than YETI Holdings. However, Ralph Lauren Corp is 1.25 times less risky than YETI Holdings. It trades about 0.15 of its potential returns per unit of risk. YETI Holdings is currently generating about -0.06 per unit of risk. If you would invest  22,000  in Ralph Lauren Corp on September 24, 2024 and sell it today you would earn a total of  1,028  from holding Ralph Lauren Corp or generate 4.67% 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.  YETI Holdings

Ralph Lauren Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

YETI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YETI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, YETI Holdings 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 YETI Holdings

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

The idea behind Ralph Lauren Corp and YETI Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.