Correlation Between Culp and Designer Brands

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

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

Diversification Opportunities for Culp and Designer Brands

0.64

Correlation Coefficient

Culp  Designer Brands

Poor diversification

The 3 months correlation between Culp and Designer is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Culp Inc and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Culp 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 Culp Inc 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 Culp i.e., Culp and Designer Brands go up and down completely randomly.

Pair Corralation between Culp and Designer Brands

Given the investment horizon of 90 days Culp Inc is expected to generate 0.49 times more return on investment than Designer Brands. However, Culp Inc is 2.05 times less risky than Designer Brands. It trades about 0.01 of its potential returns per unit of risk. Designer Brands is currently generating about 0.0 per unit of risk. If you would invest  547.00  in Culp Inc on October 7, 2024 and sell it today you would earn a total of  21.00  from holding Culp Inc or generate 3.84% return on investment over 90 days.

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

Culp Inc  vs.  Designer Brands

Culp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Culp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Culp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 latest abnormal performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Culp and Designer Brands

The main advantage of trading using opposite Culp and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Culp 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 Culp Inc 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.