Correlation Between Capri Holdings and Digital Brands
Can any of the company-specific risk be diversified away by investing in both Capri Holdings and Digital Brands 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 Capri Holdings and Digital Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capri Holdings and Digital Brands Group, you can compare the effects of market volatilities on Capri Holdings and Digital Brands 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 Capri Holdings with a short position of Digital Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capri Holdings and Digital Brands.
Diversification Opportunities for Capri Holdings and Digital Brands
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capri and Digital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Digital Brands Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Brands Group and Capri Holdings 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 Capri Holdings are associated (or correlated) with Digital Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Brands Group has no effect on the direction of Capri Holdings i.e., Capri Holdings and Digital Brands go up and down completely randomly.
Pair Corralation between Capri Holdings and Digital Brands
Given the investment horizon of 90 days Capri Holdings is expected to generate 0.21 times more return on investment than Digital Brands. However, Capri Holdings is 4.76 times less risky than Digital Brands. It trades about 0.11 of its potential returns per unit of risk. Digital Brands Group is currently generating about -0.39 per unit of risk. If you would invest 2,005 in Capri Holdings on September 20, 2024 and sell it today you would earn a total of 113.00 from holding Capri Holdings or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capri Holdings vs. Digital Brands Group
Performance |
| Timeline |
| Capri Holdings |
| Digital Brands Group |
Capri Holdings and Digital Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capri Holdings and Digital Brands
The main advantage of trading using opposite Capri Holdings and Digital Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings position performs unexpectedly, Digital Brands 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 Digital Brands will offset losses from the drop in Digital Brands' long position.| Capri Holdings vs. Movado Group | Capri Holdings vs. Signet Jewelers | Capri Holdings vs. Lanvin Group Holdings | Capri Holdings vs. TheRealReal |
| Digital Brands vs. Burlington Stores | Digital Brands vs. Urban Outfitters | Digital Brands vs. American Eagle Outfitters | Digital Brands vs. Childrens Place |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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