Correlation Between APACHE and Ralph Lauren

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

By analyzing existing cross correlation between APACHE P 525 and Ralph Lauren Corp, you can compare the effects of market volatilities on APACHE and Ralph Lauren 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 APACHE with a short position of Ralph Lauren. Check out your portfolio center. Please also check ongoing floating volatility patterns of APACHE and Ralph Lauren.

Diversification Opportunities for APACHE and Ralph Lauren

-0.27

Correlation Coefficient

APACHE  Ralph Lauren

Very good diversification

The 3 months correlation between APACHE and Ralph is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding APACHE P 525 and Ralph Lauren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren Corp and APACHE 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 APACHE P 525 are associated (or correlated) with Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren Corp has no effect on the direction of APACHE i.e., APACHE and Ralph Lauren go up and down completely randomly.

Pair Corralation between APACHE and Ralph Lauren

Assuming the 90 days trading horizon APACHE P 525 is expected to under-perform the Ralph Lauren. But the bond apears to be less risky and, when comparing its historical volatility, APACHE P 525 is 1.46 times less risky than Ralph Lauren. The bond trades about -0.19 of its potential returns per unit of risk. The Ralph Lauren Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  20,303  in Ralph Lauren Corp on August 29, 2024 and sell it today you would earn a total of  2,021  from holding Ralph Lauren Corp or generate 9.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

APACHE P 525  vs.  Ralph Lauren Corp

APACHE P 525

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APACHE P 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for APACHE P 525 investors.

Ralph Lauren Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APACHE and Ralph Lauren

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

The idea behind APACHE P 525 and Ralph Lauren 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.