Correlation Between XBP Europe and Ralph Lauren

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

By analyzing existing cross correlation between XBP Europe Holdings and Ralph Lauren Corp, you can compare the effects of market volatilities on XBP Europe and Ralph Lauren 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 XBP Europe with a short position of Ralph Lauren. Check out your portfolio center. Please also check ongoing floating volatility patterns of XBP Europe and Ralph Lauren.

Diversification Opportunities for XBP Europe and Ralph Lauren

0.49

Correlation Coefficient

XBP Europe  Ralph Lauren

Very weak diversification

The 3 months correlation between XBP and Ralph is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding XBP Europe Holdings and Ralph Lauren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren Corp and XBP Europe 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 XBP Europe Holdings are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren Corp has no effect on the direction of XBP Europe i.e., XBP Europe and Ralph Lauren go up and down completely randomly.

Pair Corralation between XBP Europe and Ralph Lauren

Assuming the 90 days horizon XBP Europe Holdings is expected to generate 12.21 times more return on investment than Ralph Lauren. However, XBP Europe is 12.21 times more volatile than Ralph Lauren Corp. It trades about 0.08 of its potential returns per unit of risk. Ralph Lauren Corp is currently generating about 0.17 per unit of risk. If you would invest  4.58  in XBP Europe Holdings on October 7, 2024 and sell it today you would lose (0.58) from holding XBP Europe Holdings or give up 12.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.73%
Values	Daily Returns

XBP Europe Holdings  vs.  Ralph Lauren Corp

XBP Europe Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XBP Europe Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, XBP Europe showed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XBP Europe and Ralph Lauren

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

The idea behind XBP Europe Holdings and Ralph Lauren Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.