Correlation Between Tapestry and Kering SA

Can any of the company-specific risk be diversified away by investing in both Tapestry and Kering SA 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 Tapestry and Kering SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tapestry and Kering SA, you can compare the effects of market volatilities on Tapestry and Kering SA 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 Tapestry with a short position of Kering SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tapestry and Kering SA.

Diversification Opportunities for Tapestry and Kering SA

0.85

Correlation Coefficient

Tapestry  Kering SA

Very poor diversification

The 3 months correlation between Tapestry and Kering is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA and Tapestry 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 Tapestry are associated (or correlated) with Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Tapestry i.e., Tapestry and Kering SA go up and down completely randomly.

Pair Corralation between Tapestry and Kering SA

Considering the 90-day investment horizon Tapestry is expected to generate 0.86 times more return on investment than Kering SA. However, Tapestry is 1.16 times less risky than Kering SA. It trades about 0.24 of its potential returns per unit of risk. Kering SA is currently generating about 0.14 per unit of risk. If you would invest  6,194  in Tapestry on November 28, 2024 and sell it today you would earn a total of  2,245  from holding Tapestry or generate 36.24% return on investment over 90 days.

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

Tapestry  vs.  Kering SA

Tapestry

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Kering SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kering SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kering SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tapestry and Kering SA

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

The idea behind Tapestry and Kering SA 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.