Correlation Between Designer Brands and Icon Energy

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

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

Diversification Opportunities for Designer Brands and Icon Energy

-0.23

Correlation Coefficient

Designer Brands  Icon Energy

Very good diversification

The 3 months correlation between Designer and Icon is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Designer Brands i.e., Designer Brands and Icon Energy go up and down completely randomly.

Pair Corralation between Designer Brands and Icon Energy

Considering the 90-day investment horizon Designer Brands is expected to generate 1.41 times more return on investment than Icon Energy. However, Designer Brands is 1.41 times more volatile than Icon Energy Corp. It trades about -0.05 of its potential returns per unit of risk. Icon Energy Corp is currently generating about -0.11 per unit of risk. If you would invest  579.00  in Designer Brands on October 9, 2024 and sell it today you would lose (29.00) from holding Designer Brands or give up 5.01% of portfolio value over 90 days.

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

Designer Brands  vs.  Icon Energy Corp

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 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.

Icon Energy Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Icon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Designer Brands and Icon Energy

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

The idea behind Designer Brands and Icon Energy Corp 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.