Correlation Between Compagnie Financire and Brunello Cucinelli

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

By analyzing existing cross correlation between Compagnie Financire Richemont and Brunello Cucinelli SpA, you can compare the effects of market volatilities on Compagnie Financire and Brunello Cucinelli 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 Compagnie Financire with a short position of Brunello Cucinelli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financire and Brunello Cucinelli.

Diversification Opportunities for Compagnie Financire and Brunello Cucinelli

0.8

Correlation Coefficient

Compagnie Financire  Brunello Cucinelli

Very poor diversification

The 3 months correlation between Compagnie and Brunello is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Brunello Cucinelli SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brunello Cucinelli SpA and Compagnie Financire 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 Compagnie Financire Richemont are associated (or correlated) with Brunello Cucinelli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brunello Cucinelli SpA has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and Brunello Cucinelli go up and down completely randomly.

Pair Corralation between Compagnie Financire and Brunello Cucinelli

Assuming the 90 days trading horizon Compagnie Financire is expected to generate 1.29 times less return on investment than Brunello Cucinelli. But when comparing it to its historical volatility, Compagnie Financire Richemont is 1.08 times less risky than Brunello Cucinelli. It trades about 0.25 of its potential returns per unit of risk. Brunello Cucinelli SpA is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  8,775  in Brunello Cucinelli SpA on September 22, 2024 and sell it today you would earn a total of  1,555  from holding Brunello Cucinelli SpA or generate 17.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Compagnie Financire Richemont  vs.  Brunello Cucinelli SpA

Compagnie Financire

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie Financire reported solid returns over the last few months and may actually be approaching a breakup point.

Brunello Cucinelli SpA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brunello Cucinelli SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brunello Cucinelli reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie Financire and Brunello Cucinelli

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

The idea behind Compagnie Financire Richemont and Brunello Cucinelli SpA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.