Correlation Between Watches Of and Burberry Group

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

By analyzing existing cross correlation between Watches of Switzerland and Burberry Group plc, you can compare the effects of market volatilities on Watches Of and Burberry Group 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 Watches Of with a short position of Burberry Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watches Of and Burberry Group.

Diversification Opportunities for Watches Of and Burberry Group

0.46

Correlation Coefficient

Watches Of  Burberry Group

Very weak diversification

The 3 months correlation between Watches and Burberry is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Watches of Switzerland and Burberry Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burberry Group plc and Watches Of 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 Watches of Switzerland are associated (or correlated) with Burberry Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burberry Group plc has no effect on the direction of Watches Of i.e., Watches Of and Burberry Group go up and down completely randomly.

Pair Corralation between Watches Of and Burberry Group

Assuming the 90 days horizon Watches of Switzerland is expected to under-perform the Burberry Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Watches of Switzerland is 1.31 times less risky than Burberry Group. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Burberry Group plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Burberry Group plc on December 30, 2024 and sell it today you would lose (80.00) from holding Burberry Group plc or give up 6.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Watches of Switzerland  vs.  Burberry Group plc

Watches of Switzerland

Risk-Adjusted Performance

Very Weak

Over the last 90 days Watches of Switzerland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Burberry Group plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burberry Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Burberry Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Watches Of and Burberry Group

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

The idea behind Watches of Switzerland and Burberry Group plc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.