Correlation Between Ralph Lauren and Canon

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

Diversification Opportunities for Ralph Lauren and Canon

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ralph and Canon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and Canon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc and Ralph Lauren 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 Ralph Lauren Corp are associated (or correlated) with Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Canon go up and down completely randomly.

Pair Corralation between Ralph Lauren and Canon

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 0.04 times more return on investment than Canon. However, Ralph Lauren Corp is 22.94 times less risky than Canon. It trades about 0.03 of its potential returns per unit of risk. Canon Inc is currently generating about -0.32 per unit of risk. If you would invest  9,498  in Ralph Lauren Corp on September 5, 2022 and sell it today you would earn a total of  2,058  from holding Ralph Lauren Corp or generate 21.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Ralph Lauren Corp  vs.  Canon Inc

 Performance (%) 
       Timeline  
Ralph Lauren Corp 
Ralph Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Ralph Lauren revealed solid returns over the last few months and may actually be approaching a breakup point.

Ralph Price Channel

Canon Inc 
Canon Performance
0 of 100
Over the last 90 days Canon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Canon Price Channel

Ralph Lauren and Canon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ralph Lauren and Canon

The main advantage of trading using opposite Ralph Lauren and Canon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren position performs unexpectedly, Canon 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 Canon will offset losses from the drop in Canon's long position.
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The idea behind Ralph Lauren Corp and Canon Inc 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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