Correlation Between Capri Holdings and Service International

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

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

Diversification Opportunities for Capri Holdings and Service International

-0.76

Correlation Coefficient

Capri Holdings  Service International

Pay attention - limited upside

The 3 months correlation between Capri and Service is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Service International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service International 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 Service International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service International has no effect on the direction of Capri Holdings i.e., Capri Holdings and Service International go up and down completely randomly.

Pair Corralation between Capri Holdings and Service International

Given the investment horizon of 90 days Capri Holdings is expected to generate 1.84 times more return on investment than Service International. However, Capri Holdings is 1.84 times more volatile than Service International. It trades about 0.19 of its potential returns per unit of risk. Service International is currently generating about 0.35 per unit of risk. If you would invest  2,048  in Capri Holdings on August 30, 2024 and sell it today you would earn a total of  304.00  from holding Capri Holdings or generate 14.84% return on investment over 90 days.

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

Capri Holdings  vs.  Service International

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 December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Service International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Service International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Service International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capri Holdings and Service International

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

The idea behind Capri Holdings and Service International 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.