Correlation Between Ralph Lauren and Ming Le

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

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

Diversification Opportunities for Ralph Lauren and Ming Le

0.63

Correlation Coefficient

Ralph Lauren  Ming Le

Poor diversification

The 3 months correlation between Ralph and Ming is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren and Ming Le Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ming Le Sports and Ralph Lauren 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 Ralph Lauren are associated (or correlated) with Ming Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ming Le Sports has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Ming Le go up and down completely randomly.

Pair Corralation between Ralph Lauren and Ming Le

Assuming the 90 days horizon Ralph Lauren is expected to generate 0.54 times more return on investment than Ming Le. However, Ralph Lauren is 1.86 times less risky than Ming Le. It trades about 0.02 of its potential returns per unit of risk. Ming Le Sports is currently generating about -0.34 per unit of risk. If you would invest  21,793  in Ralph Lauren on October 1, 2024 and sell it today you would earn a total of  92.00  from holding Ralph Lauren or generate 0.42% return on investment over 90 days.

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

Ralph Lauren  vs.  Ming Le Sports

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.

Ming Le Sports

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ming Le Sports are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ming Le reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ralph Lauren and Ming Le

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

The idea behind Ralph Lauren and Ming Le Sports 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.