Correlation Between Associated British and PVH Corp

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Can any of the company-specific risk be diversified away by investing in both Associated British and PVH Corp 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 Associated British and PVH Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and PVH Corp, you can compare the effects of market volatilities on Associated British and PVH Corp 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 Associated British with a short position of PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and PVH Corp.

Diversification Opportunities for Associated British and PVH Corp

AssociatedPVHDiversified AwayAssociatedPVHDiversified Away100%
-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Associated and PVH is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp and Associated British 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 Associated British Foods are associated (or correlated) with PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Associated British i.e., Associated British and PVH Corp go up and down completely randomly.

Pair Corralation between Associated British and PVH Corp

Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the PVH Corp. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.14 times less risky than PVH Corp. The stock trades about -0.07 of its potential returns per unit of risk. The PVH Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,904  in PVH Corp on September 29, 2024 and sell it today you would earn a total of  481.00  from holding PVH Corp or generate 4.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Associated British Foods  vs.  PVH Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15AFO1 PVH
       Timeline  
Associated British Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2525.52626.52727.528
PVH Corp 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in PVH Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, PVH Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec9095100105

Associated British and PVH Corp Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.42-1.84-1.25-0.67-0.09020.461.041.622.22.78 0.080.100.120.140.160.18
JavaScript chart by amCharts 3.21.15AFO1 PVH
       Returns  

Pair Trading with Associated British and PVH Corp

The main advantage of trading using opposite Associated British and PVH Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, PVH Corp 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 PVH Corp will offset losses from the drop in PVH Corp's long position.
The idea behind Associated British Foods and PVH 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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