Correlation Between Torrid Holdings and Destination

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

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

Diversification Opportunities for Torrid Holdings and Destination

-0.27

Correlation Coefficient

Torrid Holdings  Destination

Very good diversification

The 3 months correlation between Torrid and Destination is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Torrid Holdings and Destination XL Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destination XL Group and Torrid Holdings 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 Torrid Holdings are associated (or correlated) with Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destination XL Group has no effect on the direction of Torrid Holdings i.e., Torrid Holdings and Destination go up and down completely randomly.

Pair Corralation between Torrid Holdings and Destination

Given the investment horizon of 90 days Torrid Holdings is expected to generate 1.74 times more return on investment than Destination. However, Torrid Holdings is 1.74 times more volatile than Destination XL Group. It trades about -0.01 of its potential returns per unit of risk. Destination XL Group is currently generating about -0.04 per unit of risk. If you would invest  742.00  in Torrid Holdings on September 29, 2024 and sell it today you would lose (214.00) from holding Torrid Holdings or give up 28.84% of portfolio value over 90 days.

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

Torrid Holdings  vs.  Destination XL Group

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.

Destination XL Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destination XL Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Destination is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Torrid Holdings and Destination

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

The idea behind Torrid Holdings and Destination XL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.