Correlation Between Designer Brands and Virgin Group

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

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

Diversification Opportunities for Designer Brands and Virgin Group

-0.62

Correlation Coefficient

Designer Brands  Virgin Group

Excellent diversification

The 3 months correlation between Designer and Virgin is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition and Designer Brands 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 Designer Brands are associated (or correlated) with Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of Designer Brands i.e., Designer Brands and Virgin Group go up and down completely randomly.

Pair Corralation between Designer Brands and Virgin Group

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Virgin Group. In addition to that, Designer Brands is 1.01 times more volatile than Virgin Group Acquisition. It trades about -0.13 of its total potential returns per unit of risk. Virgin Group Acquisition is currently generating about 0.08 per unit of volatility. If you would invest  138.00  in Virgin Group Acquisition on December 20, 2024 and sell it today you would earn a total of  22.00  from holding Virgin Group Acquisition or generate 15.94% return on investment over 90 days.

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

Designer Brands  vs.  Virgin Group Acquisition

Designer Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Designer Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Virgin Group Acquisition

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Designer Brands and Virgin Group

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

The idea behind Designer Brands and Virgin Group Acquisition 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.