Correlation Between Capri Holdings and Topbuild Corp

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

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

Diversification Opportunities for Capri Holdings and Topbuild Corp

-0.43

Correlation Coefficient

Capri Holdings  Topbuild Corp

Very good diversification

The 3 months correlation between Capri and Topbuild is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp 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 Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Capri Holdings i.e., Capri Holdings and Topbuild Corp go up and down completely randomly.

Pair Corralation between Capri Holdings and Topbuild Corp

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the Topbuild Corp. In addition to that, Capri Holdings is 1.07 times more volatile than Topbuild Corp. It trades about -0.5 of its total potential returns per unit of risk. Topbuild Corp is currently generating about -0.39 per unit of volatility. If you would invest  43,540  in Topbuild Corp on January 24, 2024 and sell it today you would lose (5,074) from holding Topbuild Corp or give up 11.65% of portfolio value over 90 days.

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

Capri Holdings  vs.  Topbuild Corp

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Topbuild Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Topbuild Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Topbuild Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Capri Holdings and Topbuild Corp

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

The idea behind Capri Holdings and Topbuild Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.