Correlation Between Swatch Group and Capri Holdings
Can any of the company-specific risk be diversified away by investing in both Swatch Group 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 Swatch Group and Capri Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swatch Group AG and Capri Holdings, you can compare the effects of market volatilities on Swatch Group 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 Swatch Group with a short position of Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Capri Holdings.
Diversification Opportunities for Swatch Group and Capri Holdings
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Swatch and Capri is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Swatch Group 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 Swatch Group AG 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 Swatch Group i.e., Swatch Group and Capri Holdings go up and down completely randomly.
Pair Corralation between Swatch Group and Capri Holdings
Assuming the 90 days horizon Swatch Group is expected to generate 8.65 times less return on investment than Capri Holdings. But when comparing it to its historical volatility, Swatch Group AG is 1.61 times less risky than Capri Holdings. It trades about 0.06 of its potential returns per unit of risk. Capri Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,061 in Capri Holdings on November 3, 2024 and sell it today you would earn a total of 417.00 from holding Capri Holdings or generate 20.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swatch Group AG vs. Capri Holdings
Performance |
| Timeline |
| Swatch Group AG |
| Capri Holdings |
Swatch Group and Capri Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swatch Group and Capri Holdings
The main advantage of trading using opposite Swatch Group and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group 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.| Swatch Group vs. Kering SA | Swatch Group vs. Burberry Group Plc | Swatch Group vs. Prada Spa PK | Swatch Group vs. Compagnie Financire Richemont |
| Capri Holdings vs. Movado Group | Capri Holdings vs. Signet Jewelers | Capri Holdings vs. Lanvin Group Holdings | Capri Holdings vs. TheRealReal |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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