Correlation Between Buckle and Torrid Holdings

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

By analyzing existing cross correlation between Buckle Inc and Torrid Holdings, you can compare the effects of market volatilities on Buckle and Torrid 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 Buckle with a short position of Torrid Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Buckle and Torrid Holdings.

Diversification Opportunities for Buckle and Torrid Holdings

0.68

Correlation Coefficient

Buckle  Torrid Holdings

Poor diversification

The 3 months correlation between Buckle and Torrid is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and Torrid Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torrid Holdings and Buckle 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 Buckle Inc are associated (or correlated) with Torrid Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torrid Holdings has no effect on the direction of Buckle i.e., Buckle and Torrid Holdings go up and down completely randomly.

Pair Corralation between Buckle and Torrid Holdings

Considering the 90-day investment horizon Buckle Inc is expected to generate 0.33 times more return on investment than Torrid Holdings. However, Buckle Inc is 3.02 times less risky than Torrid Holdings. It trades about 0.15 of its potential returns per unit of risk. Torrid Holdings is currently generating about -0.01 per unit of risk. If you would invest  3,567  in Buckle Inc on September 29, 2024 and sell it today you would earn a total of  1,586  from holding Buckle Inc or generate 44.46% return on investment over 90 days.

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

Buckle Inc  vs.  Torrid Holdings

Buckle Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buckle Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, Buckle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Torrid Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Torrid Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Torrid Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Buckle and Torrid Holdings

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

The idea behind Buckle Inc and Torrid 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.