Correlation Between Levi Strauss and Ralph Lauren
Can any of the company-specific risk be diversified away by investing in both Levi Strauss and Ralph Lauren 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 Levi Strauss and Ralph Lauren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Levi Strauss Co and Ralph Lauren Corp, you can compare the effects of market volatilities on Levi Strauss and Ralph Lauren 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 Levi Strauss with a short position of Ralph Lauren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Levi Strauss and Ralph Lauren.
Diversification Opportunities for Levi Strauss and Ralph Lauren
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Levi and Ralph is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and Ralph Lauren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren Corp and Levi Strauss 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 Levi Strauss Co are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren Corp has no effect on the direction of Levi Strauss i.e., Levi Strauss and Ralph Lauren go up and down completely randomly.
Pair Corralation between Levi Strauss and Ralph Lauren
Given the investment horizon of 90 days Levi Strauss is expected to generate 2.71 times less return on investment than Ralph Lauren. But when comparing it to its historical volatility, Levi Strauss Co is 1.28 times less risky than Ralph Lauren. It trades about 0.14 of its potential returns per unit of risk. Ralph Lauren Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 24,046 in Ralph Lauren Corp on November 18, 2024 and sell it today you would earn a total of 4,217 from holding Ralph Lauren Corp or generate 17.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Levi Strauss Co vs. Ralph Lauren Corp
Performance |
| Timeline |
| Levi Strauss |
| Ralph Lauren Corp |
Levi Strauss and Ralph Lauren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Levi Strauss and Ralph Lauren
The main advantage of trading using opposite Levi Strauss and Ralph Lauren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Levi Strauss position performs unexpectedly, Ralph Lauren 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 Ralph Lauren will offset losses from the drop in Ralph Lauren's long position.| Levi Strauss vs. LYFT Inc | Levi Strauss vs. Tapestry | Levi Strauss vs. Capri Holdings | Levi Strauss vs. YETI Holdings |
| Ralph Lauren vs. Columbia Sportswear | Ralph Lauren vs. Kontoor Brands | Ralph Lauren vs. Levi Strauss Co | Ralph Lauren vs. G III Apparel Group |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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