Correlation Between Designer Brands and SNDL

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

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

Diversification Opportunities for Designer Brands and SNDL

0.8

Correlation Coefficient

Designer Brands  SNDL

Very poor diversification

The 3 months correlation between Designer and SNDL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Designer Brands i.e., Designer Brands and SNDL go up and down completely randomly.

Pair Corralation between Designer Brands and SNDL

Considering the 90-day investment horizon Designer Brands is expected to under-perform the SNDL. In addition to that, Designer Brands is 1.54 times more volatile than SNDL Inc. It trades about -0.15 of its total potential returns per unit of risk. SNDL Inc is currently generating about -0.03 per unit of volatility. If you would invest  173.00  in SNDL Inc on December 19, 2024 and sell it today you would lose (13.00) from holding SNDL Inc or give up 7.51% of portfolio value over 90 days.

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

Designer Brands  vs.  SNDL Inc

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.

SNDL Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, SNDL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Designer Brands and SNDL

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

The idea behind Designer Brands and SNDL Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..