Correlation Between Crocs and Capri Holdings

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Can any of the company-specific risk be diversified away by investing in both Crocs and Capri Holdings 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 Crocs and Capri Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crocs Inc and Capri Holdings, you can compare the effects of market volatilities on Crocs and Capri Holdings 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 Crocs with a short position of Capri Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crocs and Capri Holdings.

Diversification Opportunities for Crocs and Capri Holdings

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Crocs and Capri is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Crocs Inc and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Crocs 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 Crocs Inc are associated (or correlated) with Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Crocs i.e., Crocs and Capri Holdings go up and down completely randomly.

Pair Corralation between Crocs and Capri Holdings

Given the investment horizon of 90 days Crocs Inc is expected to generate 2.65 times more return on investment than Capri Holdings. However, Crocs is 2.65 times more volatile than Capri Holdings. It trades about 0.4 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.13 per unit of risk. If you would invest  12,109  in Crocs Inc on December 29, 2023 and sell it today you would earn a total of  2,271  from holding Crocs Inc or generate 18.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Crocs Inc  vs.  Capri Holdings

 Performance 
       Timeline  
Crocs Inc 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Crocs Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Crocs showed solid returns over the last few months and may actually be approaching a breakup point.
Capri Holdings 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Crocs and Capri Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Crocs and Capri Holdings

The main advantage of trading using opposite Crocs and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crocs position performs unexpectedly, Capri Holdings 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 Capri Holdings will offset losses from the drop in Capri Holdings' long position.
The idea behind Crocs Inc and Capri Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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