Correlation Between Burberry Group and Salvatore Ferragamo

Can any of the company-specific risk be diversified away by investing in both Burberry Group and Salvatore Ferragamo 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 Burberry Group and Salvatore Ferragamo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Burberry Group Plc and Salvatore Ferragamo SpA, you can compare the effects of market volatilities on Burberry Group and Salvatore Ferragamo 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 Burberry Group with a short position of Salvatore Ferragamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burberry Group and Salvatore Ferragamo.

Diversification Opportunities for Burberry Group and Salvatore Ferragamo

0.78

Correlation Coefficient

Burberry Group  Salvatore Ferragamo

Poor diversification

The 3 months correlation between Burberry and Salvatore is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Burberry Group Plc and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo SpA and Burberry Group 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 Burberry Group Plc are associated (or correlated) with Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Burberry Group i.e., Burberry Group and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Burberry Group and Salvatore Ferragamo

Assuming the 90 days horizon Burberry Group Plc is expected to generate 0.59 times more return on investment than Salvatore Ferragamo. However, Burberry Group Plc is 1.7 times less risky than Salvatore Ferragamo. It trades about -0.17 of its potential returns per unit of risk. Salvatore Ferragamo SpA is currently generating about -0.22 per unit of risk. If you would invest  1,540  in Burberry Group Plc on January 24, 2024 and sell it today you would lose (88.00) from holding Burberry Group Plc or give up 5.71% of portfolio value over 90 days.

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

Burberry Group Plc  vs.  Salvatore Ferragamo SpA

Burberry Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Burberry Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salvatore Ferragamo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Burberry Group and Salvatore Ferragamo

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

The idea behind Burberry Group Plc and Salvatore Ferragamo 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.