Correlation Between Lakeland Inds and Capri Holdings

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

Diversification Opportunities for Lakeland Inds and Capri Holdings

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Lakeland and Capri is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Inds and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings and Lakeland Inds 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 Lakeland Inds 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 Lakeland Inds i.e., Lakeland Inds and Capri Holdings go up and down completely randomly.

Pair Corralation between Lakeland Inds and Capri Holdings

Given the investment horizon of 90 days Lakeland Inds is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Lakeland Inds is 1.17 times less risky than Capri Holdings. The stock trades about -0.01 of its potential returns per unit of risk. The Capri Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,499  in Capri Holdings on May 13, 2022 and sell it today you would earn a total of  3,581  from holding Capri Holdings or generate 238.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Lakeland Inds  vs.  Capri Holdings

 Performance (%) 
       Timeline  
Lakeland Inds 
Lakeland Performance
0 of 100
Over the last 90 days Lakeland Inds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Lakeland Inds is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Lakeland Price Channel

Capri Holdings 
Capri Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capri Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Capri Price Channel

Lakeland Inds and Capri Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lakeland Inds and Capri Holdings

The main advantage of trading using opposite Lakeland Inds and Capri Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakeland Inds 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 Lakeland Inds 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.
Check out your portfolio center. 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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