Correlation Between Designer Brands and Steven Madden

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

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

Diversification Opportunities for Designer Brands and Steven Madden

0.68

Correlation Coefficient

Designer Brands  Steven Madden

Poor diversification

The 3 months correlation between Designer and Steven is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Designer Brands i.e., Designer Brands and Steven Madden go up and down completely randomly.

Pair Corralation between Designer Brands and Steven Madden

Considering the 90-day investment horizon Designer Brands is expected to under-perform the Steven Madden. In addition to that, Designer Brands is 2.42 times more volatile than Steven Madden. It trades about -0.05 of its total potential returns per unit of risk. Steven Madden is currently generating about 0.03 per unit of volatility. If you would invest  4,431  in Steven Madden on September 1, 2024 and sell it today you would earn a total of  127.00  from holding Steven Madden or generate 2.87% return on investment over 90 days.

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

Designer Brands  vs.  Steven Madden

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 abnormal performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Steven Madden

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steven Madden are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Designer Brands and Steven Madden

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

The idea behind Designer Brands and Steven Madden 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.