Correlation Between Xcel Brands and Capri Holdings

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

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

Diversification Opportunities for Xcel Brands and Capri Holdings

0.2

Correlation Coefficient

Xcel Brands  Capri Holdings

Modest diversification

The 3 months correlation between Xcel and Capri is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Brands and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Xcel Brands 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 Xcel Brands 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 Xcel Brands i.e., Xcel Brands and Capri Holdings go up and down completely randomly.

Pair Corralation between Xcel Brands and Capri Holdings

Given the investment horizon of 90 days Xcel Brands is expected to generate 0.39 times more return on investment than Capri Holdings. However, Xcel Brands is 2.58 times less risky than Capri Holdings. It trades about -0.07 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.09 per unit of risk. If you would invest  71.00  in Xcel Brands on September 15, 2024 and sell it today you would lose (9.00) from holding Xcel Brands or give up 12.68% of portfolio value over 90 days.

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

Xcel Brands  vs.  Capri Holdings

Xcel Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Xcel Brands and Capri Holdings

The main advantage of trading using opposite Xcel Brands and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Brands 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 Xcel Brands 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.