Correlation Between Capri Holdings and Destination

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

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

Diversification Opportunities for Capri Holdings and Destination

0.4

Correlation Coefficient

Capri Holdings  Destination

Very weak diversification

The 3 months correlation between Capri and Destination is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group and Capri Holdings 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 Capri Holdings are associated (or correlated) with Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of Capri Holdings i.e., Capri Holdings and Destination go up and down completely randomly.

Pair Corralation between Capri Holdings and Destination

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Destination. In addition to that, Capri Holdings is 2.17 times more volatile than Destination XL Group. It trades about -0.09 of its total potential returns per unit of risk. Destination XL Group is currently generating about -0.05 per unit of volatility. If you would invest  277.00  in Destination XL Group on September 18, 2024 and sell it today you would lose (31.00) from holding Destination XL Group or give up 11.19% of portfolio value over 90 days.

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

Capri Holdings  vs.  Destination XL Group

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 abnormal 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.

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Capri Holdings and Destination

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

The idea behind Capri Holdings and Destination XL Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.