Correlation Between Designer Brands and GSX Techedu

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

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

Diversification Opportunities for Designer Brands and GSX Techedu

0.0

Correlation Coefficient

Designer Brands  GSX Techedu

Pay attention - limited upside

The 3 months correlation between Designer and GSX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and GSX Techedu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSX Techedu 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 GSX Techedu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSX Techedu has no effect on the direction of Designer Brands i.e., Designer Brands and GSX Techedu go up and down completely randomly.

Pair Corralation between Designer Brands and GSX Techedu

If you would invest (100.00) in GSX Techedu on October 23, 2024 and sell it today you would earn a total of  100.00  from holding GSX Techedu or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Designer Brands  vs.  GSX Techedu

Designer Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Designer Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

GSX Techedu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSX Techedu has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GSX Techedu is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Designer Brands and GSX Techedu

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

The idea behind Designer Brands and GSX Techedu 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.