Correlation Between Boohoo PLC and ASOS Plc

Can any of the company-specific risk be diversified away by investing in both Boohoo PLC and ASOS Plc 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 Boohoo PLC and ASOS Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BoohooCom PLC ADR and ASOS plc PK, you can compare the effects of market volatilities on Boohoo PLC and ASOS Plc 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 Boohoo PLC with a short position of ASOS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boohoo PLC and ASOS Plc.

Diversification Opportunities for Boohoo PLC and ASOS Plc

-0.63

Correlation Coefficient

Boohoo PLC  ASOS Plc

Excellent diversification

The 3 months correlation between Boohoo and ASOS is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BoohooCom PLC ADR and ASOS plc PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASOS plc PK and Boohoo PLC 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 BoohooCom PLC ADR are associated (or correlated) with ASOS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASOS plc PK has no effect on the direction of Boohoo PLC i.e., Boohoo PLC and ASOS Plc go up and down completely randomly.

Pair Corralation between Boohoo PLC and ASOS Plc

Assuming the 90 days horizon BoohooCom PLC ADR is expected to generate 0.46 times more return on investment than ASOS Plc. However, BoohooCom PLC ADR is 2.16 times less risky than ASOS Plc. It trades about 0.18 of its potential returns per unit of risk. ASOS plc PK is currently generating about -0.06 per unit of risk. If you would invest  712.00  in BoohooCom PLC ADR on September 8, 2024 and sell it today you would earn a total of  109.00  from holding BoohooCom PLC ADR or generate 15.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

BoohooCom PLC ADR  vs.  ASOS plc PK

BoohooCom PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BoohooCom PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Boohoo PLC showed solid returns over the last few months and may actually be approaching a breakup point.

ASOS plc PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASOS plc PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Boohoo PLC and ASOS Plc

The main advantage of trading using opposite Boohoo PLC and ASOS Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boohoo PLC position performs unexpectedly, ASOS Plc 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 ASOS Plc will offset losses from the drop in ASOS Plc's long position.

The idea behind BoohooCom PLC ADR and ASOS plc PK 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.