Correlation Between Compagnie Financiere and Prada SpA
Can any of the company-specific risk be diversified away by investing in both Compagnie Financiere and Prada SpA 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 Compagnie Financiere and Prada SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Financiere Richemont and Prada SpA, you can compare the effects of market volatilities on Compagnie Financiere and Prada SpA 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 Compagnie Financiere with a short position of Prada SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financiere and Prada SpA.
Diversification Opportunities for Compagnie Financiere and Prada SpA
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Compagnie and Prada is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financiere Richemont and Prada SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prada SpA and Compagnie Financiere 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 Compagnie Financiere Richemont are associated (or correlated) with Prada SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prada SpA has no effect on the direction of Compagnie Financiere i.e., Compagnie Financiere and Prada SpA go up and down completely randomly.
Pair Corralation between Compagnie Financiere and Prada SpA
Assuming the 90 days horizon Compagnie Financiere Richemont is expected to generate 2.52 times more return on investment than Prada SpA. However, Compagnie Financiere is 2.52 times more volatile than Prada SpA. It trades about 0.32 of its potential returns per unit of risk. Prada SpA is currently generating about -0.22 per unit of risk. If you would invest 1,514 in Compagnie Financiere Richemont on November 3, 2024 and sell it today you would earn a total of 417.00 from holding Compagnie Financiere Richemont or generate 27.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Compagnie Financiere Richemont vs. Prada SpA
Performance |
| Timeline |
| Compagnie Financiere |
| Prada SpA |
Compagnie Financiere and Prada SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie Financiere and Prada SpA
The main advantage of trading using opposite Compagnie Financiere and Prada SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financiere position performs unexpectedly, Prada SpA 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 Prada SpA will offset losses from the drop in Prada SpA's long position.| Compagnie Financiere vs. Burberry Group Plc | Compagnie Financiere vs. Hermes International SA | Compagnie Financiere vs. Prada Spa PK | Compagnie Financiere vs. Swatch Group AG |
| Prada SpA vs. Compagnie Financiere Richemont | Prada SpA vs. Kering SA | Prada SpA vs. Burberry Group Plc | Prada SpA vs. Swatch Group AG |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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