Correlation Between H M and Ralph Lauren

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

By analyzing existing cross correlation between H M Hennes and Ralph Lauren, you can compare the effects of market volatilities on H M and Ralph Lauren 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 H M with a short position of Ralph Lauren. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Ralph Lauren.

Diversification Opportunities for H M and Ralph Lauren

0.79

Correlation Coefficient

H M  Ralph Lauren

Poor diversification

The 3 months correlation between HMSB and Ralph is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Ralph Lauren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren and H M 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 H M Hennes are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren has no effect on the direction of H M i.e., H M and Ralph Lauren go up and down completely randomly.

Pair Corralation between H M and Ralph Lauren

Assuming the 90 days trading horizon H M is expected to generate 2.51 times less return on investment than Ralph Lauren. In addition to that, H M is 1.91 times more volatile than Ralph Lauren. It trades about 0.04 of its total potential returns per unit of risk. Ralph Lauren is currently generating about 0.2 per unit of volatility. If you would invest  16,426  in Ralph Lauren on September 22, 2024 and sell it today you would earn a total of  4,684  from holding Ralph Lauren or generate 28.52% return on investment over 90 days.

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

H M Hennes  vs.  Ralph Lauren

H M Hennes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, H M may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ralph Lauren

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ralph Lauren reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H M and Ralph Lauren

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

The idea behind H M Hennes and Ralph Lauren 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.