Correlation Between Charles Colvard and Capri Holdings

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

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

Diversification Opportunities for Charles Colvard and Capri Holdings

0.74

Correlation Coefficient

Charles Colvard  Capri Holdings

Poor diversification

The 3 months correlation between Charles and Capri is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Charles Colvard and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Charles Colvard 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 Charles Colvard 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 Charles Colvard i.e., Charles Colvard and Capri Holdings go up and down completely randomly.

Pair Corralation between Charles Colvard and Capri Holdings

Given the investment horizon of 90 days Charles Colvard is expected to generate 2.95 times more return on investment than Capri Holdings. However, Charles Colvard is 2.95 times more volatile than Capri Holdings. It trades about 0.05 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.57 per unit of risk. If you would invest  35.00  in Charles Colvard on January 20, 2024 and sell it today you would earn a total of  1.00  from holding Charles Colvard or generate 2.86% return on investment over 90 days.

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

Charles Colvard  vs.  Capri Holdings

Charles Colvard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charles Colvard has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 unsteady 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.

Pair Trading with Charles Colvard and Capri Holdings

The main advantage of trading using opposite Charles Colvard and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charles Colvard 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 Charles Colvard 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.