Correlation Between Birkenstock Holding and Designer Brands

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

By analyzing existing cross correlation between Birkenstock Holding plc and Designer Brands, you can compare the effects of market volatilities on Birkenstock Holding and Designer Brands 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 Birkenstock Holding with a short position of Designer Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Birkenstock Holding and Designer Brands.

Diversification Opportunities for Birkenstock Holding and Designer Brands

0.41

Correlation Coefficient

Birkenstock Holding  Designer Brands

Very weak diversification

The 3 months correlation between Birkenstock and Designer is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Birkenstock Holding plc and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Birkenstock Holding 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 Birkenstock Holding plc are associated (or correlated) with Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Birkenstock Holding i.e., Birkenstock Holding and Designer Brands go up and down completely randomly.

Pair Corralation between Birkenstock Holding and Designer Brands

Given the investment horizon of 90 days Birkenstock Holding plc is expected to generate 0.43 times more return on investment than Designer Brands. However, Birkenstock Holding plc is 2.31 times less risky than Designer Brands. It trades about 0.06 of its potential returns per unit of risk. Designer Brands is currently generating about -0.01 per unit of risk. If you would invest  4,821  in Birkenstock Holding plc on September 4, 2024 and sell it today you would earn a total of  330.00  from holding Birkenstock Holding plc or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Birkenstock Holding plc  vs.  Designer Brands

Birkenstock Holding plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Birkenstock Holding plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Birkenstock Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Designer Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Designer Brands is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Birkenstock Holding and Designer Brands

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

The idea behind Birkenstock Holding plc and Designer Brands 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 the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.