Correlation Between Prada SpA and Compagnie Financière
Can any of the company-specific risk be diversified away by investing in both Prada SpA and Compagnie Financière 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 Prada SpA and Compagnie Financière into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prada SpA and Compagnie Financire Richemont, you can compare the effects of market volatilities on Prada SpA and Compagnie Financière 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 Prada SpA with a short position of Compagnie Financière. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prada SpA and Compagnie Financière.
Diversification Opportunities for Prada SpA and Compagnie Financière
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prada and Compagnie is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Prada SpA and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financière and Prada SpA 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 Prada SpA are associated (or correlated) with Compagnie Financière. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financière has no effect on the direction of Prada SpA i.e., Prada SpA and Compagnie Financière go up and down completely randomly.
Pair Corralation between Prada SpA and Compagnie Financière
Assuming the 90 days horizon Prada SpA is expected to under-perform the Compagnie Financière. But the pink sheet apears to be less risky and, when comparing its historical volatility, Prada SpA is 2.74 times less risky than Compagnie Financière. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Compagnie Financire Richemont is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 15,255 in Compagnie Financire Richemont on November 3, 2024 and sell it today you would earn a total of 4,270 from holding Compagnie Financire Richemont or generate 27.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Prada SpA vs. Compagnie Financire Richemont
Performance |
| Timeline |
| Prada SpA |
| Compagnie Financière |
Prada SpA and Compagnie Financière Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prada SpA and Compagnie Financière
The main advantage of trading using opposite Prada SpA and Compagnie Financière positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prada SpA position performs unexpectedly, Compagnie Financière 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 Compagnie Financière will offset losses from the drop in Compagnie Financière's long position.| Prada SpA vs. Compagnie Financiere Richemont | Prada SpA vs. Kering SA | Prada SpA vs. Burberry Group Plc | Prada SpA vs. Swatch Group AG |
| Compagnie Financière vs. Christian Dior SE | Compagnie Financière vs. Kering SA | Compagnie Financière vs. Prada SpA | Compagnie Financière vs. Compagnie Financiere Richemont |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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