Correlation Between H M and Capri Holdings

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

Diversification Opportunities for H M and Capri Holdings

-0.33
  Correlation Coefficient
 H M

Very good diversification

The 3 months correlation between HMSB and Capri is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Capri Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and H M 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 H M Hennes 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 H M i.e., H M and Capri Holdings go up and down completely randomly.

Pair Corralation between H M and Capri Holdings

Assuming the 90 days trading horizon H M Hennes is expected to generate 1.09 times more return on investment than Capri Holdings. However, H M is 1.09 times more volatile than Capri Holdings Limited. It trades about 0.13 of its potential returns per unit of risk. Capri Holdings Limited is currently generating about 0.07 per unit of risk. If you would invest  1,189  in H M Hennes on August 28, 2024 and sell it today you would earn a total of  162.00  from holding H M Hennes or generate 13.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

H M Hennes  vs.  Capri Holdings Limited

 Performance 
       Timeline  
H M Hennes 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, H M exhibited solid returns over the last few months and may actually be approaching a breakup point.
Capri Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Capri Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

H M and Capri Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with H M and Capri Holdings

The main advantage of trading using opposite H M and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H M 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.
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The idea behind H M Hennes and Capri Holdings Limited 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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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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