Correlation Between Watches Of and Capri Holdings

Can any of the company-specific risk be diversified away by investing in both Watches Of and Capri 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 Watches Of and Capri Holdings 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 Capri Holdings, you can compare the effects of market volatilities on Watches Of and Capri 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 Watches Of with a short position of Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watches Of and Capri Holdings.

Diversification Opportunities for Watches Of and Capri Holdings

0.02

Correlation Coefficient

Watches Of  Capri Holdings

Significant diversification

The 3 months correlation between Watches and Capri is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Watches of Switzerland and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Watches Of i.e., Watches Of and Capri Holdings go up and down completely randomly.

Pair Corralation between Watches Of and Capri Holdings

Assuming the 90 days horizon Watches of Switzerland is expected to generate 1.11 times more return on investment than Capri Holdings. However, Watches Of is 1.11 times more volatile than Capri Holdings. It trades about 0.04 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.05 per unit of risk. If you would invest  593.00  in Watches of Switzerland on November 28, 2024 and sell it today you would earn a total of  27.00  from holding Watches of Switzerland or generate 4.55% return on investment over 90 days.

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

Watches of Switzerland  vs.  Capri Holdings

Watches of Switzerland

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Watches of Switzerland are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Watches Of may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Capri Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Watches Of and Capri Holdings

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

The idea behind Watches of Switzerland and Capri 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.