Correlation Between Ralph Lauren and Dixie

Can any of the company-specific risk be diversified away by investing in both Ralph Lauren and Dixie 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 Dixie 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 The Dixie Group, you can compare the effects of market volatilities on Ralph Lauren and Dixie 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 Dixie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ralph Lauren and Dixie.

Diversification Opportunities for Ralph Lauren and Dixie

-0.04

Correlation Coefficient

Ralph Lauren  Dixie

Good diversification

The 3 months correlation between Ralph and Dixie is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and The Dixie Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixie Group 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 Dixie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixie Group has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and Dixie go up and down completely randomly.

Pair Corralation between Ralph Lauren and Dixie

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to under-perform the Dixie. But the stock apears to be less risky and, when comparing its historical volatility, Ralph Lauren Corp is 5.29 times less risky than Dixie. The stock trades about -0.15 of its potential returns per unit of risk. The The Dixie Group is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  48.00  in The Dixie Group on February 3, 2024 and sell it today you would earn a total of  16.50  from holding The Dixie Group or generate 34.38% return on investment over 90 days.

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

Ralph Lauren Corp  vs.  The Dixie Group

Ralph Lauren Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Ralph Lauren disclosed solid returns over the last few months and may actually be approaching a breakup point.

Dixie Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Dixie Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dixie displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ralph Lauren and Dixie

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

The idea behind Ralph Lauren Corp and The Dixie Group 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.