Correlation Between Continental and Capri Holdings

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

By analyzing existing cross correlation between Caleres and Capri Holdings, you can compare the effects of market volatilities on Continental 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 Continental with a short position of Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and Capri Holdings.

Diversification Opportunities for Continental and Capri Holdings

0.55

Correlation Coefficient

Continental  Capri Holdings

Very weak diversification

The 3 months correlation between Continental and Capri is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Continental 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 Caleres 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 Continental i.e., Continental and Capri Holdings go up and down completely randomly.

Pair Corralation between Continental and Capri Holdings

Considering the 90-day investment horizon Caleres is expected to generate 0.54 times more return on investment than Capri Holdings. However, Caleres is 1.86 times less risky than Capri Holdings. It trades about -0.1 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.1 per unit of risk. If you would invest  3,287  in Caleres on September 17, 2024 and sell it today you would lose (786.00) from holding Caleres or give up 23.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Caleres  vs.  Capri Holdings

Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Continental and Capri Holdings

The main advantage of trading using opposite Continental and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental 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.

The idea behind Caleres and Capri Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.