Correlation Between Prada Spa and Kering SA
Can any of the company-specific risk be diversified away by investing in both Prada Spa and Kering SA 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 Kering SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prada Spa PK and Kering SA, you can compare the effects of market volatilities on Prada Spa and Kering SA 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 Kering SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prada Spa and Kering SA.
Diversification Opportunities for Prada Spa and Kering SA
Very weak diversification
The 3 months correlation between Prada and Kering is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Prada Spa PK and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA 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 PK are associated (or correlated) with Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Prada Spa i.e., Prada Spa and Kering SA go up and down completely randomly.
Pair Corralation between Prada Spa and Kering SA
Assuming the 90 days horizon Prada Spa is expected to generate 2.71 times less return on investment than Kering SA. But when comparing it to its historical volatility, Prada Spa PK is 1.35 times less risky than Kering SA. It trades about 0.09 of its potential returns per unit of risk. Kering SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,399 in Kering SA on November 2, 2024 and sell it today you would earn a total of 264.00 from holding Kering SA or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prada Spa PK vs. Kering SA
Performance |
| Timeline |
| Prada Spa PK |
| Kering SA |
Prada Spa and Kering SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prada Spa and Kering SA
The main advantage of trading using opposite Prada Spa and Kering SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prada Spa position performs unexpectedly, Kering SA 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 Kering SA will offset losses from the drop in Kering SA's long position.| Prada Spa vs. Chow Tai Fook | Prada Spa vs. Christian Dior SE | Prada Spa vs. Kering SA | Prada Spa vs. Christian Dior SE |
| Kering SA vs. Burberry Group Plc | Kering SA vs. Swatch Group AG | Kering SA vs. Prada Spa PK | Kering SA vs. Compagnie Financire 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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