Correlation Between Designer Brands and Noble Plc

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

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

Diversification Opportunities for Designer Brands and Noble Plc

0.17

Correlation Coefficient

Designer Brands  Noble Plc

Average diversification

The 3 months correlation between Designer and Noble is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Noble plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noble plc 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 Noble Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noble plc has no effect on the direction of Designer Brands i.e., Designer Brands and Noble Plc go up and down completely randomly.

Pair Corralation between Designer Brands and Noble Plc

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Noble Plc. In addition to that, Designer Brands is 1.78 times more volatile than Noble plc. It trades about -0.06 of its total potential returns per unit of risk. Noble plc is currently generating about 0.09 per unit of volatility. If you would invest  3,242  in Noble plc on October 10, 2024 and sell it today you would earn a total of  117.00  from holding Noble plc or generate 3.61% return on investment over 90 days.

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

Designer Brands  vs.  Noble plc

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.

Noble plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Noble plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Noble Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Designer Brands and Noble Plc

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

The idea behind Designer Brands and Noble plc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.