Correlation Between Capri Holdings and Montauk Renewables

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

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

Diversification Opportunities for Capri Holdings and Montauk Renewables

0.19

Correlation Coefficient

Capri Holdings  Montauk Renewables

Average diversification

The 3 months correlation between Capri and Montauk is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Capri Holdings i.e., Capri Holdings and Montauk Renewables go up and down completely randomly.

Pair Corralation between Capri Holdings and Montauk Renewables

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Montauk Renewables. In addition to that, Capri Holdings is 1.71 times more volatile than Montauk Renewables. It trades about -0.05 of its total potential returns per unit of risk. Montauk Renewables is currently generating about 0.03 per unit of volatility. If you would invest  432.00  in Montauk Renewables on September 2, 2024 and sell it today you would earn a total of  10.00  from holding Montauk Renewables or generate 2.31% return on investment over 90 days.

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

Capri Holdings  vs.  Montauk Renewables

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.

Montauk Renewables

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montauk Renewables are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Montauk Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capri Holdings and Montauk Renewables

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

The idea behind Capri Holdings and Montauk Renewables 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.